Journal of Regulatory Economics

, Volume 5, Issue 2, pp 183–197

An optimal tax/subsidy for output and pollution control under asymmetric information in oligopoly markets

  • Jae-Cheol Kim
  • Ki-Bok Chang


This paper constructs an optimal incentive tax/subsidy scheme in an oligopoly market with pollution, as a generalization of the Loeb-Magat scheme, which is nondiscriminatory and requires less information for implementation than the conventional ones. Some interesting properties of the scheme are discussed.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Baron, D. P., and R. B. Myerson. 1982. “Regulating a Monopolist with Unknown Costs.”Econometrica 50: 911–930.Google Scholar
  2. Cech, P-A. 1991. “Market Efficient Oligopoly Regulation: An Incentive Compatible Mechanism.” Working Paper, Northwestern University.Google Scholar
  3. Dasgupta, P., P. Hammond, and E. Maskin. 1980. “On Imperfect Information and Optimal Pollution Control.”Review of Economic Studies 47: 857–860.Google Scholar
  4. Dixit, A. 1986. “Comparative Statics for Oligopoly.”International Economic Review 27: 107–122.Google Scholar
  5. Koenig, E. F. 1985. “Indirect Methods for Regulating Externalities Under Uncertainty.”Quarterly Journal of Economics 100: 479–493.Google Scholar
  6. Laffont, J. J. 1977. “More on Prices vs. Quantities.”Review of Economic Studies 44: 177–182.Google Scholar
  7. Laffont, J. J., and J. Tirole. 1986. “Using Cost Observation to Regulate Firms.”Journal of Political Economy 94: 614–641.Google Scholar
  8. Loeb, M., and W. A. Magat. 1979. “A Decentralized Method for Utility Regulation.”Journal of Law and Economics 22: 399–404.Google Scholar
  9. Meran, G., and U. Schwalbe. 1987. “Pollution control and collective Penal ties.”Journal of Institutional and Theoretical Economics 143: 616–629.Google Scholar
  10. Riordan, M. H., and D. Sappington. 1987. “Awarding Monopoly Franchises.”American Economic Review 77: 375–387.Google Scholar
  11. Sappington, D., and D. Sibley. 1988. “Regulating without Cost Information.”International Economic Review 29: 297–306.Google Scholar
  12. Segerson, K. 1988. “Uncertainty and Incentives for Nonpoint Pollution Control.”Journal of Environmental Economics and Management 15: 87–98.Google Scholar
  13. Shaffer, S. 1989. “A First-Best Regulatory Tax for Oligopoly.”Journal of Regulatory Economics 1: 373–389.Google Scholar
  14. Shleifer, A. 1985. “A Theory of Yardstick Competition.”Rand Journal of Economics 16: 319–327.Google Scholar
  15. Sibley, D. 1989. “Asymmetric Information, Incentives and Price-Cap Regulation.”Rand Journal of Economics 20: 392–404.Google Scholar
  16. Spulber, D. F. 1988. “Optimal environmental Regulation under Asymmetric Information.”Journal of Public Economics 35: 163–181.Google Scholar
  17. Weitzman, M. L. 1974. “Prices vs. Quantities.”Review of Economic Studies 41: 477–491.Google Scholar
  18. Weitzman, M. L. 1978. “Optimal Rewards for Economic Regulation.”American Economic Review 68: 683–691.Google Scholar

Copyright information

© Kluwer Academic Publishers 1993

Authors and Affiliations

  • Jae-Cheol Kim
    • 1
  • Ki-Bok Chang
    • 1
  1. 1.Department of Management and PolicyKorea Advanced Institute of Science and TechnologyTaejonKorea

Personalised recommendations