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Sonia Schwartz
''Pollution Permit Market: Using Incentive Contracts to Reduce Dominant Firm Inefficiencies''
( 2010, Vol. 30 No.4 )
Incentive contracts can be proposed to a dominant firm that has been excluded from the pollution permit market. We determine the optimal characteristics of a contract considering the trade-off between market efficiency and the cost of public funds. We show that under incomplete information the firm always buys fewer quotas than under complete information. We conclude this study by giving a concrete rule to implement such a contract.
Keywords: pollution quotas, incentive contract.
JEL: Q5 - Environmental Economics: General
D8 - Information, Knowledge, and Uncertainty: General
Manuscript Received : Apr 20 2010 Manuscript Accepted : Dec 02 2010

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