Regulating Global Externalities

CentER Discussion Paper Series No. 2019-001

22 Pages Posted: 25 Jan 2019

See all articles by Roweno Heijmans

Roweno Heijmans

Tilburg University

Reyer Gerlagh

Tilburg University - Tilburg University School of Economics and Management

Date Written: January 7, 2019

Abstract

The question in which we are interested is how a market inhabited by multiple agents, about whom we are differentially uncertain, and who trade goods the use of which imposes a negative effect on others, is to be ideally regulated. We show that a priori asymmetric uncertainty, when combined with a posteriori observed outcomes, is a rich source of information that can be used to reduce aggregate uncertainty. The observation implies that whereas asymmetric information usually entails a cost on welfare, it can help achieve greater efficiency in regulation.

Keywords: asymmetric information, regulatory instruments, policy updating, asymmetric uncertainty, decision making under uncertainty

JEL Classification: D82, D83, H23

Suggested Citation

Heijmans, Roweno and Gerlagh, Reyer, Regulating Global Externalities (January 7, 2019). CentER Discussion Paper Series No. 2019-001. Available at SSRN: https://ssrn.com/abstract=3312185 or http://dx.doi.org/10.2139/ssrn.3312185

Roweno Heijmans (Contact Author)

Tilburg University ( email )

P.O. Box 90153
Tilburg, DC Noord-Brabant 5000 LE
Netherlands

Reyer Gerlagh

Tilburg University - Tilburg University School of Economics and Management ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

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