Regulating Global Externalities

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The question in which we are interested is how a market inhabited by multiple
agents, about whom we are differentially uncertain, and who trade goods the use of
which imposes a negative effect on others, is to be ideally regulated. We show that a
priori asymmetric uncertainty, when combined with a posteriori observed outcomes,
is a rich source of information that can be used to reduce aggregate uncertainty. The observation implies that whereas asymmetric information usually entails a cost on welfare, it can help achieve greater efficiency in regulation.
Original languageEnglish
Place of PublicationTilburg
PublisherCentER, Center for Economic Research
Number of pages22
Publication statusPublished - 10 Jan 2019

Publication series

NameCentER Discussion Paper



  • asymmetric information
  • regulatory instruments
  • policy updating
  • asymmetric uncerntainty
  • decison making under uncertainty

Cite this

Heijmans, R. J. R. K., & Gerlagh, R. (2019). Regulating Global Externalities. (CentER Discussion Paper; Vol. 2019-001). Tilburg: CentER, Center for Economic Research.