Dynamic Quotas with Learning

17 Pages Posted: 6 Feb 2001

See all articles by Christopher Costello

Christopher Costello

University of California, Santa Barbara (UCSB) - Donald Bren School of Environmental Science & Management

Larry S. Karp

University of California, Berkeley

Date Written: November 20, 2000

Abstract

We study the optimal quota sequence, in a stationary environment, where a regulator and a non-strategic firm have asymmetric information. The regulator is able to learn about the unknown cost parameter by using a quota that is slack with positive probability. It is never optimal for the regulator to learn gradually. In the first period, he either ignores the possibility of learning, or he tries to improve his information. Regardless of the outcome in the first period, he never experiments in subsequent periods.

Keywords: quotas, asymmetric information, searching

JEL Classification: D83, L50

Suggested Citation

Costello, Christopher and Karp, Larry S., Dynamic Quotas with Learning (November 20, 2000). Available at SSRN: https://ssrn.com/abstract=258980 or http://dx.doi.org/10.2139/ssrn.258980

Christopher Costello (Contact Author)

University of California, Santa Barbara (UCSB) - Donald Bren School of Environmental Science & Management ( email )

4670 Physical Sciences North
Santa Barbara, CA 93106-5131
United States
(805) 893-5802 (Phone)
(805) 893-7612 (Fax)

Larry S. Karp

University of California, Berkeley ( email )

Dept. of Agriculture & Resource Economics
313 Giannini Hall
Berkeley, CA 94720
United States
510-643-8911 (Fax)

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