What is the difference between a market-based solution and a command and control solution, with respect...

What is the difference between a market-based solution and a command and control solution, with respect to externalities?

Think about how private individuals can solve externalities through Coasian bargaining. Why do Coasian solutions fail in the real world?

Jenna loves the show Downton Abbey and watches in on PBS every night, but never donates to support the public television station during fundraising drives. What would economists call Jenna?

Expert Solution

Lawmakers are presented with two wide catagory of changing production and consumption tendencies in society. The traditional approach is known as command and control used to set specific limit for emissions.The command and control approach stipulates specific standard that made by polluters.specified allowable quantities of pollution and the control technologies to be applied are classified under command-and-control regulations (Benney, 2015). A good example is the environmental laws passed by the United States specifying the amount of pollution that could be emitted by a smokestack and the accompanying penalty if it was exceeded. On the other hand, market-oriented incentives rely on market forces to control pollution.

Large number of parties and ‘global’ externality.Ex/ Air pollution from power plants.Transactions costs are high because there are millions of people who may be harmed by pollution.Incentive for people who benefit from the reduced pollution to free-ride (non-excludability).

Rahul Sunny answered 1 year ago

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