Externality Policy Toolkit

Same pollution problem, four policy instruments — compare efficiency, revenue, and distributional outcomes

Market Setup
Demand intercept (a) 100
Demand slope (b) 1.0
Private MC intercept (c₀) 10
Private MC slope (c₁) 0.5

Externality
Ext. damage intercept (d₀) 5
Ext. damage slope (d₁) 0.4
P = a − b·Q (Demand)
PMC = c₀ + c₁·Q (Private MC)
MED = d₀ + d₁·Q (Marginal Ext. Damage)
SMC = PMC + MED

Policy Instrument
Click a policy card above to activate it and adjust its parameters here.
💰
Pigouvian Tax
Per-unit tax on output equal to marginal external damage at Q*
Price
🎫
Cap & Trade
Set a quantity cap; permits trade to equalize marginal costs
Quantity
📋
Command & Control
Uniform emission/output standard — no flexibility
Standard
🤝
Coasian Bargaining
Assign property rights; parties negotiate to efficient outcome
Rights
Market Equilibrium & Policy
Demand
PMC (Private)
SMC (Social)
MED
Welfare Decomposition
Consumer Surplus
Producer Surplus
DWL / Ext. Damage
Gov. Revenue
Policy Comparison Dashboard