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Evaluating Policy Impacts on Bargaining Power
A local government is considering two policies to address the conflict between a town's single, polluting employer and its citizens.
- Policy A: Offers a direct subsidy to the firm for each unit of pollution it reduces.
- Policy B: Offers a job retraining and relocation grant to any citizen who wishes to leave the town.
Critically evaluate both policies. Which policy is more likely to increase the citizens' structural power relative to the firm? Justify your conclusion by explaining how each policy affects the 'next best alternative' for both the firm and the citizens.
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Introduction to Microeconomics Course
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