The inter-temporal resource allocation efficiency of a property rights-based common-pool resource system is challenged by a cost externality when one user’s extraction raises the extraction cost for others. This paper builds a dynamic resource allocation model to illustrate the efficiency loss...

This paper demonstrates a novel mechanism through which emissions cap-and-trade mitigates production-side distortion vis-à-vis an emissions cap policy under a heterogeneousfirm framework with imperfect competition. When clean and dirty inputs are gross substitutes, we find that a pro rata...