Environmental Regulation Simulation

Emissions Tax

You will be taxed for each unit of emissions produced. You have two options:

  1. Produce 1 or 2 units of output and pollute and pay the emissions tax
  2. Reduce your emissions by 1 or 2 units and pay the abatement cost for each unit reduced

You should choose the option that results in the maximization of your profits.

A roll of the dice will determine the initial emissions tax. The per unit emissions tax:

T= die + .5

For example, if the die roll is 6 the tax is 6.5. Trial and error will be used to determine the emissions tax that reduces emissions to the optimal amount.