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Andrew Yates and Daniel English
''Citizens' demand for permits and Kwerel''s incentive compatible mechanism for pollution control''
( 2007, Vol. 17 No.4 )
An interesting feature of pollution permit markets is that citizens may purchase permits to directly lower the levels of pollution. Kwerel's mechanism (Review of Economic Studies~1977) is not incentive compatible when citizens demand permits. We show that a modification of Kwerel''s mechainism, the minimum-price mechanism, is incentive compatible when citizens demand permits, even in the case where there is uncertainty about the damages from pollution.
JEL: Q2 - Renewable Resources and Conservation: General
Manuscript Received : Jan 24 2007 Manuscript Accepted : Feb 01 2007

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