In markets where production has adverse externalities, policy makers may wish to increase welfare by imposing a cap on … market entries. In this paper, we examine the implications that the cap has on the firms' investment equilibrium policy and … consideration of the option value triggers investment at price above the social marginal cost of production, then it is optimal to …

In markets where production has adverse externalities, policy makers may wish to increase welfare by imposing a cap on … market entries. In this paper, we examine the implications that the cap has on the firms' investment equilibrium policy and … consideration of the option value triggers investment at price above the social marginal cost of production, then it is optimal to …

return to an investment in loss-prevention is greater than the private return. From a perspective of social welfare, the … market allocation is not optimal and leads to under-investment in prevention allround. This article considers consumer … externalities by setting appropriate prevention incentives through insurance premiums. A monopoly insurance solution reduces not …