By specializing Montero's (2002) model to an oligopoly with linear demand and quadratic abatement costs, we extend his comparison of the incentives to invest in R&D under emission and performance standards by solving for a closed form solution of the underlying two-stage game. This allows for a full comparison of the two instruments in terms of their resulting propensity for R&D and equilibrium industry output. In addition, we incorporate an equilibrium welfare analysis. Finally, we investigate a three-stage game wherein a regulator sets a socially optimal emission cap under each policy instrument. For the latter game, while closed-form solutions are not possible, we establish that the resulting welfare is always larger under a performance standard. We thank two referees of this journal and Hassan Benchekroun (as associate editor) for thorough and thoughtful reports, with many useful suggestions. We also gratefully acknowledge the wonderful hospitality at the Haus-dor¤ Institute for Mathematics, University of Bonn, where this work was initiated, in the summer 2013.
Without an instrument to identify the reference point, prospect theory includes a degree of freedom that makes the model difficult to falsify. To address this issue, we propose a foundation for prospect theory that advances existing approaches with three innovations. First, the reference point is not known a priori; if preferences are reference-dependent, the reference point is revealed from behavior. Second, the key preference axiom is formulated as a consistency property for attitudes toward probabilities; it entails both a revealed preference test for reference-dependence and a tool suitable for empirical measurement. Third, minimal assumptions are imposed for outcomes, thereby extending the model to general settings. By incorporating these three features we deliver general foundations for prospect theory that show how reference points can be identified and how the model can be falsified.
Political clientelism and low quality of democracy are recurrent problems in Latin American societies. The purpose of this paper is to understand the complex processes of subjectivation introduced and fostered by various practices of political clientelism. To explore this complexity, a systemic framework encompassing three dimensions of analysis—structural, institutional, and subjective—is adopted. To explore the impact that the subjectivation processes have on the formation of citizenship, we applied the framework examining 18 in‐depth interviews with beneficiaries of the Social Inclusion Plan in San Luis, Argentina. Our results suggest that practices and discourses of political clientelism foster citizens' dependence on the state and government. By focusing on the beneficiaries' perceptions, our findings facilitate a better understanding of the real impact of state policies and help to identify ways to empower low‐income people to exercise their rights and to develop a democratic, less dependent, and mature citizenship.
This paper evaluates the comparative performance of emission and performance standards in a one-stage game of abatement R&D and Cournot duopoly, in terms of R&D propensity, output and social welfare. For each standard, …rms simultaneously select R&D and output levels, given the standard's exogenous constraint. A performance standard generates higher R&D investments and output, but lower pro…t, than the pollutionequivalent emissions standard. The same conclusion extends to social welfare only under high demand. We also conduct a similar comparison for each of the two instruments across the one-stage and the two-stage models. The two-stage model leads to higher levels of R&D and industry output for both standards. The same conclusion applies to the social welfare comparison for the emissions standard. However, for the performance standard, the same conclusion requires a damage parameter below a given threshhold. When the standards are chosen to maximize welfare, the performance comparison becomes highly parameter-dependent, except that social welfare is higher for the performance standard. Some policy implications are discussed.
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