Prices vs. Quantities: Robust Regulation
Fuente:
arXiv
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| Autore principale: | |
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| Natura: | Preprint |
| Pubblicazione: |
2026
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| _version_ | 1866911520890290176 |
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| author | Kang, Zi Yang |
| author_facet | Kang, Zi Yang |
| contents | This paper revisits the classic instrument choice problem in a setting with consumption externalities, through the lens of robust mechanism design. A regulator can implement any incentive-compatible policy but is uncertain about how individual demand is correlated with marginal externalities, and evaluates policies by worst-case welfare. The optimal policy is a quantity control: a floor for positive externalities and a ceiling for negative externalities. If the sign of the correlation is known, a uniform tax or subsidy can be optimal. The framework also applies to regulatory uncertainty and costly screening, providing a welfare-based explanation for the prevalence of non-price policies. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2603_15832 |
| institution | arXiv |
| publishDate | 2026 |
| record_format | arxiv |
| spellingShingle | Prices vs. Quantities: Robust Regulation Kang, Zi Yang General Economics Economics This paper revisits the classic instrument choice problem in a setting with consumption externalities, through the lens of robust mechanism design. A regulator can implement any incentive-compatible policy but is uncertain about how individual demand is correlated with marginal externalities, and evaluates policies by worst-case welfare. The optimal policy is a quantity control: a floor for positive externalities and a ceiling for negative externalities. If the sign of the correlation is known, a uniform tax or subsidy can be optimal. The framework also applies to regulatory uncertainty and costly screening, providing a welfare-based explanation for the prevalence of non-price policies. |
| title | Prices vs. Quantities: Robust Regulation |
| topic | General Economics Economics |
| url | https://arxiv.org/abs/2603.15832 |