The Role of Stocks and Shocks Concepts in the Debate Over Price Versus Quantity
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Parsons_The Role of.pdf
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330.67 KB
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Author(s)
Parsons, John E.
Taschini, Luca
Date Issued
November 2012
Journal
Environmental and Resource Economics
Publisher
Springer-Verlag
Citation
Parsons, John E., and Luca Taschini. “The Role of Stocks and Shocks Concepts in the Debate Over Price Versus Quantity.” Environmental and Resource Economics 55.1 (2013): 71–86.
Version
Final published version
Abstract
Recent literature showed that the choice between a price or quantity control depends, in part, on the dynamic structure of cost uncertainty. Temporary shocks to abatement cost favors the use of a price control, while permanent shocks favor a quantity control. Unfortunately, the importance of this assumption to the optimal choice has not yet received wide attention among economists. We analyze the regulatory problem in an alternative setting and reproduce these results. Our contribution is the simplicity of the model and the accessibility of the results, which reinforce the critical role played by the assumed structure of uncertainty.
MIT Department
Sloan School of Management
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Creative Commons Attribution
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DOI of Published Version
https://doi.org/10.1007/s10640-012-9614-y
