Give typing answer with explanation and conclusion Suppose that the government must undertake an irreversible policy decision regarding the extent of air pollution regulation. The government is making this decision in a situation of uncertainty, however. In particular, there is some probability p that the benefits will remain the same as they are this year for all future years, but there is some probability 1 - p that benefits will be less in all future years. If we take into consideration the multiperiod aspects, should we err on the side of overregulation or underregulation, compared to what we would do in a single-period choice?

Give typing answer with explanation and conclusion Suppose that the government must undertake an irreversible policy decision regarding the extent of air pollution regulation. The government is making this decision in a situation of uncertainty, however. In particular, there is some probability p that the benefits will remain the same as they are this year for all future years, but there is some probability 1 - p that benefits will be less in all future years. If we take into consideration the multiperiod aspects, should we err on the side of overregulation or underregulation, compared to what we would do in a single-period choice?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter2: Mathematics For Microeconomics

Section: Chapter Questions

Problem 2.16P

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5. Suppose that the government must undertake an irreversible policy decision regarding the extent of air pollution regulation. The government is making this decision in a situation of uncertainty. however. In particular, there is some probability p that the benefits will remain the same as they are this year for all future years, but there is some probability 1-p that benefits will be less in all future years. If we take into consideration the multiperiod aspects, should we err on the side of overregulation or underregulation, compared to what we would do in a single-period choice?
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