IDEAS home Printed from https://ideas.repec.org/p/cde/cdewps/113.html
   My bibliography  Save this paper

Optimal Management of Durable Pollution

Author

Listed:
  • Sudhir A. Shah

    (Delhi School of Economics)

Abstract

This paper studies an incompletely informed regulator's problem of inducing a firm producing durable pollution to adopt a socially optimal pollution storage technology. We construct a sparse, yet flexible, theoretical model that can be applied directly to concrete situations as it is stated explicitly in terms of statistical parameters. Next, we show the existence of an optimal regulatory contract and examine its qualitative features for one of the many regulatory problems suggested by the general model. Our model extends the standard inventory model by making the firm's storage technology a strategic choice induced by the regulatory contract. Moreover, by providing a structural model of the firm, our model generates useful information that has to be assumed in an abstract regulatory model.

Suggested Citation

  • Sudhir A. Shah, 2003. "Optimal Management of Durable Pollution," Working papers 113, Centre for Development Economics, Delhi School of Economics.
  • Handle: RePEc:cde:cdewps:113
    as

    Download full text from publisher

    File URL: http://www.cdedse.org/pdf/work113.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Xepapadeas, A. P., 1992. "Environmental policy, adjustment costs, and behavior of the firm," Journal of Environmental Economics and Management, Elsevier, vol. 23(3), pages 258-275, November.
    2. Mark Bagnoli & Ted Bergstrom, 2006. "Log-concave probability and its applications," Studies in Economic Theory, in: Charalambos D. Aliprantis & Rosa L. Matzkin & Daniel L. McFadden & James C. Moore & Nicholas C. Yann (ed.), Rationality and Equilibrium, pages 217-241, Springer.
    3. Keeler, Emmett & Spence, Michael & Zeckhauser, Richard, 1972. "The optimal control of pollution," Journal of Economic Theory, Elsevier, vol. 4(1), pages 19-34, February.
    4. Harrison, J. Michael & Taylor, Allison J., 1978. "Optimal control of a Brownian storage system," Stochastic Processes and their Applications, Elsevier, vol. 6(2), pages 179-194, January.
    5. Tirole, Jean, 1986. "Procurement and Renegotiation," Journal of Political Economy, University of Chicago Press, vol. 94(2), pages 235-259, April.
    6. C. G. Plourde, 1972. "A Model of Waste Accumulation and Disposal," Canadian Journal of Economics, Canadian Economics Association, vol. 5(1), pages 119-125, February.
    7. R. C. D'Arge & K. C. Kogiku, 1973. "Economic Growth and the Environment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 40(1), pages 61-77.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sudhir A. Shah, 2000. "Optimal Pollution Regulation in a Dynamic Stochastic Model," Working papers 84, Centre for Development Economics, Delhi School of Economics.
    2. Shah, Sudhir A., 2005. "Optimal management of durable pollution," Journal of Economic Dynamics and Control, Elsevier, vol. 29(6), pages 1121-1164, June.
    3. Alexander Pfaff & Shubham Chaudhuri & Howard Nye, 2004. "Household Production and Environmental Kuznets Curves – Examining the Desirability and Feasibility of Substitution," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 27(2), pages 187-200, February.
    4. Elke Moser & Andrea Seidl & Gustav Feichtinger, 2014. "History-dependence in production-pollution-trade-off models: a multi-stage approach," Annals of Operations Research, Springer, vol. 222(1), pages 457-481, November.
    5. Giuseppe Di Vita, 2004. "Natural Resources Dynamics: Another Look," Working Papers 2004.110, Fondazione Eni Enrico Mattei.
    6. Fisher, Anthony C & Peterson, Frederick M, 1976. "The Environment in Economics: A Survey," Journal of Economic Literature, American Economic Association, vol. 14(1), pages 1-33, March.
    7. Toman, Michael A. & Withagen, Cees, 2000. "Accumulative pollution, "clean technology," and policy design," Resource and Energy Economics, Elsevier, vol. 22(4), pages 367-384, October.
    8. Holger Wacker, 1987. "Die optimale Allokation von Arbeit in Abfallbehandlungsaktivitäten," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 123(IV), pages 467-481, December.
    9. Conrad, Klaus, 2001. "The Optimal Path of Energy and CO2 Taxes for Intertemporal Resource Allocation," Discussion Papers 602, Institut fuer Volkswirtschaftslehre und Statistik, Abteilung fuer Volkswirtschaftslehre.
    10. Wei Jin & ZhongXiang Zhang, 2016. "China's pursuit of environmentally sustainable development: Harnessing the new engine of technological innovation," CCEP Working Papers 1601, Centre for Climate & Energy Policy, Crawford School of Public Policy, The Australian National University.
    11. Verchère, Alban, 2011. "Le développement durable en question : analyses économiques autour d’un improbable compromis entre acceptions optimiste et pessimiste du rapport de l’Homme à la Nature," L'Actualité Economique, Société Canadienne de Science Economique, vol. 87(3), pages 337-403, septembre.
    12. Prieur, Fabien & Tidball, Mabel & Withagen, Cees, 2013. "Optimal emission-extraction policy in a world of scarcity and irreversibility," Resource and Energy Economics, Elsevier, vol. 35(4), pages 637-658.
    13. Moreaux, Michel & Withagen, Cees, 2013. "Climate Change and Carbon Capture and Storage," TSE Working Papers 13-393, Toulouse School of Economics (TSE).
    14. Mark Eiswerth & Wayne Johnson, 2002. "Managing Nonindigenous Invasive Species: Insights from Dynamic Analysis," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 23(3), pages 319-342, November.
    15. Marc Leandri & Mabel Tidball, 2017. "Assessing the sustainability of optimal pollution paths in a world with inertia," Working Papers 2017.10, FAERE - French Association of Environmental and Resource Economists.
    16. Farzin, Y. H., 1996. "Optimal pricing of environmental and natural resource use with stock externalities," Journal of Public Economics, Elsevier, vol. 62(1-2), pages 31-57, October.
    17. Augeraud-Véron, Emmanuelle & Leandri, Marc, 2014. "Optimal pollution control with distributed delays," Journal of Mathematical Economics, Elsevier, vol. 55(C), pages 24-32.
    18. Tsur, Yacov & Zemel, Amos, 1998. "Pollution control in an uncertain environment," Journal of Economic Dynamics and Control, Elsevier, vol. 22(6), pages 967-975, June.
    19. Jon Conrad & Lars Olson, 1992. "The economics of a stock pollutant: Aldicarb on Long Island," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 2(3), pages 245-258, May.
    20. Dinda, Soumyananda, 2005. "A theoretical basis for the environmental Kuznets curve," Ecological Economics, Elsevier, vol. 53(3), pages 403-413, May.

    More about this item

    Keywords

    regulation; durable pollution; stochastic control; incomplete information;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cde:cdewps:113. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sanjeev Sharma (email available below). General contact details of provider: https://edirc.repec.org/data/cdudein.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.