Journal Article

Regulation by Prices, Quantities, or Both: A Review of Instrument Choice

Cameron Hepburn

in Oxford Review of Economic Policy

Published on behalf of The Oxford Review of Economic Policy Ltd

Volume 22, issue 2, pages 226-247
Published in print January 2006 | ISSN: 0266-903X
Published online January 2006 | e-ISSN: 1460-2121 | DOI: http://dx.doi.org/10.1093/oxrep/grj014
Regulation by Prices, Quantities, or Both: A Review of Instrument Choice

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  • Economic Development and Growth
  • Public Economics
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Choosing appropriate policy instruments is an important part of successful regulation. Once objectives are agreed and suitable targets adopted, policy-makers can employ command-and-control regulation and/or economic instruments, and choose between fixing a price or a quantity. This paper examines the relative advantages of price, quantity, and hybrid instruments according to: their efficiency under uncertainty; the trade-off between credible commitment and flexibility; implementation; international considerations; and political economy. Various illustrations of the theory are provided, with two detailed applications to climate change and transport policy, specifically congestion and ‘safety pricing’.

Journal Article.  0 words. 

Subjects: Economic Development and Growth ; Public Economics ; Political Economy ; Public Policy

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