Welfare Improvement Properties of a Pollution Permit Market in a Production Economy

Antoine Mandel

Annals of Economics and Statistics, 2009, issue 93-94, 45-66

Abstract: This paper studies the welfare improvement properties of a market for pollution permits in an economy with a single type of externality. We show that, thanks to the opening of such a market, the Pareto optima can be decentralized as marginal pricing equilibria. However, the set of equilibria is much larger than that of Pareto optima. In order to select the efficient equilibria we introduce a demand-revealing mechanism tailored for this framework.

Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:adr:anecst:y:2009:i:93-94:p:45-66

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