TY - JOUR
T1 - When two wrongs make a right
T2 - Second-best point-nonpoint trading ratios
AU - Horan, Richard D.
AU - Shortle, James S.
N1 - Funding Information:
The authors appreciate the helpful comments of Stephen Swallow and three anonymous reviewers. The usual disclaimer applies. Horan acknowledges the support of the Michigan Agricultural Experiment Station. Shortle acknowledges the support of the USEPA National Center for Environmental Research STAR Program Grant No. EPA/R-8286841.
PY - 2005/5
Y1 - 2005/5
N2 - Most research on point-nonpoint trading focuses on the choice of trading ratio (the rate point source controls trade for nonpoint controls), although the first-best ratio is jointly determined with the optimal number of permits. In practice, program managers often do not have control over the number of permits-only the trading ratio. The trading ratio in this case can only be second-best. We derive the second-best trading ratio and, using a numerical example of trading in the Susquehanna River Basin, we find the values are in line with current ratios, but for different reasons than those that are normally provided.
AB - Most research on point-nonpoint trading focuses on the choice of trading ratio (the rate point source controls trade for nonpoint controls), although the first-best ratio is jointly determined with the optimal number of permits. In practice, program managers often do not have control over the number of permits-only the trading ratio. The trading ratio in this case can only be second-best. We derive the second-best trading ratio and, using a numerical example of trading in the Susquehanna River Basin, we find the values are in line with current ratios, but for different reasons than those that are normally provided.
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U2 - 10.1111/j.1467-8276.2005.00726.x
DO - 10.1111/j.1467-8276.2005.00726.x
M3 - Article
AN - SCOPUS:18844399840
SN - 0002-9092
VL - 87
SP - 340
EP - 352
JO - American Journal of Agricultural Economics
JF - American Journal of Agricultural Economics
IS - 2
ER -