Prices vs Quantities: The Irrelevance of Irreversibility

Fridrik Baldursson () and Nils-Henrik von der Fehr

Memorandum from Oslo University, Department of Economics

Abstract: We explore the efficacy of price and quantity controls in a dynamic set up in which the decisions of some agents are irreversible. We demonstrate that the assumption of irreversibility improves the performance of a tax relative that of a system of tradable quotas and significantly alters the optimal behavior of agents. We nevertheless conclude that taking account of 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.

Keywords: REGULATION; TAXES; UNCERTAINTY; ENVIRONMENT (search for similar items in EconPapers)
JEL-codes: D81 D9 H23 L51 Q28 Q38 (search for similar items in EconPapers)
Pages: 32 pages
Date: 1998
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Citations: View citations in EconPapers (7)

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Journal Article: Prices vs. Quantities: The Irrelevance of Irreversibility* (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:osloec:1998_009

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