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Article
Regulating by prices, quantities or both: a review of instrument choice
Oxford Review of Economic Policy (2006)
  • Cameron J Hepburn
Abstract

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’.

Keywords
  • prices vs quantities,
  • transport,
  • climate change,
  • hyrid,
  • emissions trading,
  • carbon tax
Disciplines
Publication Date
2006
Citation Information
Cameron J Hepburn. "Regulating by prices, quantities or both: a review of instrument choice" Oxford Review of Economic Policy Vol. 22 Iss. 2 (2006)
Available at: http://works.bepress.com/hepburn/7/