Question: Consider a situation with two firms that have marginal abatement cost functions The marginal damage function is again equal to D'(E)=d.E. Assume the regulator applies

Consider a situation with two firms that have marginal abatement cost functions The marginal damage function is again equal to D'(E)=d.E. Assume the regulator applies Montero’s mechanism. Determine the optimal allocation and the optimal refunding shares β₁ and β₂

-C(e)= a-be and C() = a-be.

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