Consider a situation where the marginal damage function is known and equal to D '(E) d E The aggregate marginal abatement cost curve is given by C '(E) bE where is random variable uniformly distributed on the interval The regulator wants to apply the hybrid instrument with a supply of tradable perm...

To determine the optimal levels for the tax rate the subsidy rate for unused permits and the supply of tradable permits L we need to understand the re ...

Consider a situation where the marginal damage function is known and equal to D'(E)= d.E. The aggregate

Question:

Consider a situation where the marginal damage function is known and equal to D'(E)= d.E. The aggregate marginal abatement cost curve is given by -C'(E)=ã-bE where is ãrandom variable uniformly distributed on the interval image text in transcribed The regulator wants to apply the hybrid instrument with a supply of tradable permits, a tax rate as an upper valve, and a subsidy rate for nonused permits ζ> τ as a lower valve. Determine the optimal levels for τ,ζ and L.