A politically realistic approach to environmental policy seems to require avoiding significant profit-losses in major pollution-related industries. The government can avoid such losses by freely allocating some emissions permits or by exempting some inframarginal emissions from a pollution tax....

Many pollution-related industries have political influence sufficient to block policies that would harm their profits. A politically realistic approach to environmental policy seems to require avoiding significant profit-losses to these industries. Using analytically and numerically solved...

We explore the role of firms in insuring non-verifiable output. As a device that allows workers to commit to thedelivery of their output, the firm arises endogenously as an alternative to the market if workers are sufficiently riskaverse and the firm can base its incentive payments on good...