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Regulation by prices, quantities, or both: a review of instrument choice

Hepburn, Cameron (2006) Regulation by prices, quantities, or both: a review of instrument choice. Oxford Review of Economic Policy, 22 (2). pp. 226-247. ISSN 0266-903X

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Choosing appropriate policy instruments is an important part of successful regulation. Once objectives are agreed and suitable targets adopted, policy-makers can employ command-and-control regulation and/or economic instruments, and choose between fixing a price or a quantity. This paper examines the relative advantages of price, quantity, and hybrid instruments according to: their efficiency under uncertainty; the trade-off between credible commitment and flexibility; implementation; international considerations; and political economy. Various illustrations of the theory are provided, with two detailed applications to climate change and transport policy, specifically congestion and ‘safety pricing’.

Item Type: Article
Official URL:
Additional Information: © 2006 The Author
Library of Congress subject classification: H Social Sciences > HB Economic Theory
Sets: Research centres and groups > Grantham Research Institute on Climate Change and the Environment
Collections > Economists Online
Date Deposited: 01 Mar 2011 15:14

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