In markets where production has adverse externalities, policy makers may wish to increase welfare by imposing a cap on market entries. In this paper, we examine the implications that the cap has on the firms' investment equilibrium policy and on social welfare in the presence of market...

In markets where production has adverse externalities, policy makers may wish to increase welfare by imposing a cap on market entries. In this paper, we examine the implications that the cap has on the firms' investment equilibrium policy and on social welfare in the presence of market...

In competitive industries, foreseeable policy changes lead to inevitable runs which increase the volatility of investment. We show that this phenomenon, well-known in the case of production caps, also applies to taxes, and occurs whether policy changes apply to new entrants only or equally to...