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Prices vs. Quantities in Monopolistic Competition

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  • Vetter, Henrik

Abstract

In perfectly competitive markets taxes and quotas are fully equivalent measures for environmental protection. Based on this regulators' revealed preferences for quotas over that of fees finds its explanation in the procedures and spirits of political decision making. This paper offers another explanation: Ordinary welfare economic considerations make a quota preferable to a tax when regulating polluting firms in monopolistically competitive markets.

Suggested Citation

  • Vetter, Henrik, 2000. "Prices vs. Quantities in Monopolistic Competition," Unit of Economics Working Papers 24203, Royal Veterinary and Agricultural University, Food and Resource Economic Institute.
    • Handle: RePEc:ags:rvaewp:24203
    DOI: 10.22004/ag.econ.24203
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    References listed on IDEAS

    as
    1. Bovenberg, A.L. & de Mooij, R.A., 1994. "Environmental levies and distortionary taxation," Other publications TiSEM 4b32deaa-ec2f-4de7-b59b-9, Tilburg University, School of Economics and Management.
    2. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    3. Oates, Wallace E. & Strassmann, Diana L., 1984. "Effluent fees and market structure," Journal of Public Economics, Elsevier, vol. 24(1), pages 29-46, June.
    4. Buchanan, James M, 1969. "External Diseconomies, Corrective Taxes, and Market Structure," American Economic Review, American Economic Association, vol. 59(1), pages 174-177, March.
    5. repec:cdl:agrebk:5210 is not listed on IDEAS
    6. Cropper, Maureen L & Oates, Wallace E, 1992. "Environmental Economics: A Survey," Journal of Economic Literature, American Economic Association, vol. 30(2), pages 675-740, June.
    7. Roberts, Marc J. & Spence, Michael, 1976. "Effluent charges and licenses under uncertainty," Journal of Public Economics, Elsevier, vol. 5(3-4), pages 193-208.
    8. de Bovenberg, A Lans & Mooij, Ruud A, 1994. "Environmental Levies and Distortionary Taxation," American Economic Review, American Economic Association, vol. 84(4), pages 1085-1089, September.
    Full references (including those not matched with items on IDEAS)

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    Keywords

    Demand and Price Analysis;

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