Our discussions have led to two conclusions: unregulated market behaviour may fail to produce socially efficient outcomes in the presence of externalities; direct bargaining can…

Quantitative regulations, often labelled as “command-and-control” measures, operate by establishing standards or limits that producers or consumers must comply with. They typically lay down maximum…

Incentive schemes operate by providing monetary inducements to firms or consumers to behave in ways that are thought to be socially desirable. The most straightforward…

Pollution targets can also be attained using pollution abatement subsidies. A subsidy is a negative tax, so the incentive effects on firms already in the…

A third type of incentive based pollution control scheme involves the use of marketable emissions permits (Marketable emission permits – an approach to managing ag…

Taxes, subsidies and marketable permits are each cost-effective: they achieve any chosen pollution target at the lowest possible cost. We have already explained why this…

Markets often fail to deliver socially-efficient outcomes where a natural resource is characterised by conditions of open access. A resource is described as an open…

As we explained earlier, where goods are public rather than private, resources will tend to be inefficiently allocated. The inefficiencies we have in mind manifest…

Image via Wikipedia Market failure occurs when resource allocation through market processes results in inefficient outcomes. We have suggested that state intervention can result in…

In developing business strategy, a firm should pay attention to the potential benefits of being “environmentally-friendly”. One such benefit might derive from reputation effects. An…