Who Benefits When Firms Game Corrective Policies?

Reynaert, Mathias and Sallee, James M. (2016) Who Benefits When Firms Game Corrective Policies? TSE Working Paper, n. 16-739, Toulouse

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Official URL: http://tse-fr.eu/pub/31250


Firms sometimes comply with externality-correcting policies by gaming the measure that determines policy. We show theoretically that such gaming can benefit consumers, even when it induces them to make mistakes, because gaming leads to lower prices by reducing costs. We use our insights to quantify the welfare effect of gaming in fuel-consumption ratings for automobiles, which we show increased sharply following aggressive policy reforms. We estimate a structural model of the car market and derive empirical analogs of the price effects and choice distortions identified by theory. We find that price effects outweigh distortions; on net, consumers benefit from gaming.

Item Type: Monograph (Working Paper)
Language: English
Date: December 2016
Place of Publication: Toulouse
Uncontrolled Keywords: gaming, corrective taxation, environmental regulation, carbon emissions, automobiles, fuel economy
JEL codes: H2 - Taxation, Subsidies, and Revenue
L5 - Regulation and Industrial Policy
Q5 - Environmental Economics
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse 1 Capitole
Site: UT1
Date Deposited: 09 Dec 2016 15:15
Last Modified: 21 Mar 2018 14:22
OAI ID: oai:tse-fr.eu:31250
URI: http://publications.ut-capitole.fr/id/eprint/22563

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