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The role of stocks and shocks concepts in the debate over price versus quantity

Parsons, John E. and Taschini, Luca (2013) The role of stocks and shocks concepts in the debate over price versus quantity. Environmental and Resource Economics, 55 (5). p. 71. ISSN 0924-6460

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Identification Number: 10.1007/s10640-012-9614-y


Recent literature showed that the choice between a price or quantity control depends, in part, on the dynamic structure of cost uncertainty. Temporary shocks to abatement cost favors the use of a price control, while permanent shocks favor a quantity control. Unfortunately, the importance of this assumption to the optimal choice has not yet received wide attention among economists. We analyze the regulatory sproblem in an alternative setting and reproduce these results. Our contribution is the simplicity of the model and the accessibility of the results, which reinforce the critical role played by the assumed structure of uncertainty.

Item Type: Article
Official URL:
Additional Information: © 2013 The Authors
Subjects: H Social Sciences > HB Economic Theory
Sets: Research centres and groups > Grantham Research Institute on Climate Change and the Environment
Date Deposited: 10 Dec 2012 15:18
Last Modified: 27 Jun 2014 10:56
Funders: Doris Duke Charitable Foundation, Economic and Social Research Council (ESRC) and Munich Re

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