Prices vs. Quantities: The Irrelevance of Irreversibility*

Fridrik Baldursson () and Nils-Henrik von der Fehr

Scandinavian Journal of Economics, 2004, vol. 106, issue 4, 805-821

Abstract: We explore the efficacy of price and quantity controls in a dynamic setup in which the decisions of some agents are irreversible. The assumption of irreversibility is shown to improve the performance of a tax relative to that of a system of tradable quotas and significantly alter the equilibrium behavior of agents. We nevertheless conclude that taking into account the fact that agents’ decisions may be irreversible does not lead to policy implications significantly different from those reached in a simpler model in which irreversibility is ignored.

Date: 2004
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Citations: View citations in EconPapers (11)

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https://doi.org/10.1111/j.0347-0520.2004.00389.x

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Working Paper: Prices vs Quantities: The Irrelevance of Irreversibility (1998)
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