Abstract
This paper presents a method of ameliorating externality problems when polluters and sufferers would like to take a cooperative approach, sharing costs of abatement and jointly deciding expenditure for abatement and environmental goals. The method for solving this joint problem uses decentralized messages among the involved participants concerning willingness to pay and proposals about environmental quality. The iterative process starts from exogenously specified cost shares that are then adjusted through personalized prices (which can be taxes or subsidies). The process arrives at equilibrium through price adjustment rules. The equilibrium of the process satisfies social efficiency by design. A simulated example shows that the method can solve a complex problem in a relatively few iterations.
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Loehman, E.T., Karaky, R. (2002). Cost-Sharing For Pollution Abatement. In: Holsapple, C., Jacob, V., Rao, H.R., Chaudhury, A., Agrawal, M. (eds) Business Modelling. Operations Research/Computer Science Interfaces Series, vol 16. Springer, Boston, MA. https://doi.org/10.1007/978-1-4615-0893-9_6
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DOI: https://doi.org/10.1007/978-1-4615-0893-9_6
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