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dc.contributor.authorKim, Jeong-Yoo
dc.contributor.authorBerg, Nathan
dc.date.available2014-05-21T21:56:44Z
dc.date.copyright2014-05
dc.identifier.citationKim, J.-Y., & Berg, N. (2014). Quantity restrictions with imperfect enforcement in an over-used commons: Permissive regulation to reduce over-use? (Economics Discussion Papers Series No. 1406). University of Otago. Retrieved from http://hdl.handle.net/10523/4823en
dc.identifier.issn1178-2293 (Online)
dc.identifier.urihttp://hdl.handle.net/10523/4823
dc.description.abstractThis paper presents a model of quantity regulation aimed at mitigating externalities from over-use of a commons: for example, restrictions on use of automobiles, fisheries, computer networks and electronic stock quotation systems with high-frequency traders. The model provides a counter-intuitive answer to the question of what happens when quantity restrictions are legislated but enforcement is imperfect. If the probability of enforcement depends on both violation rates and enforcement expenditures, then equilibrium congestion can become worse as the quantity restriction becomes more severe. Stricter regulation causes more agents to violate the regulation, which consequently reduces the probability of detection. Aggregate payoffs respond non-monotonically to stricter regulatory rules. We find an interior near-optimal solution that is neither too permissive nor too strict. This near-optimal regulation falls well short of achieving socially optimal levels of use of the commons, however. Moreover, socially optimal levels of use of the commons can never be achieved in this model, because there are always some agents who rationally choose to violate the regulation whenever the regulator sets the restricted activity level at the socially optimal level.en_NZ
dc.format.mimetypeapplication/pdf
dc.language.isoenen_NZ
dc.publisherUniversity of Otagoen_NZ
dc.relation.ispartofseriesEconomics Discussion Papers Seriesen_NZ
dc.rightsAttribution-NonCommercial-ShareAlike 4.0 International*
dc.rights.urihttp://creativecommons.org/licenses/by-nc-sa/4.0/*
dc.subjectcongestionen_NZ
dc.subjectemissions capen_NZ
dc.subjectregulation standarden_NZ
dc.subjecttragedy of the commonsen_NZ
dc.titleQuantity restrictions with imperfect enforcement in an over-used commons: Permissive regulation to reduce over-use?en_NZ
dc.typeDiscussion Paperen_NZ
dc.date.updated2014-05-21T21:08:42Z
otago.schoolOtago Business School / Department of Economicsen_NZ
otago.openaccessOpen
otago.relation.number1406en_NZ
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Attribution-NonCommercial-ShareAlike 4.0 International
Except where otherwise noted, this item's licence is described as Attribution-NonCommercial-ShareAlike 4.0 International