Textile Manufacturing: Tirupur Cluster
A textile manufacturing hub produces garments for export but generates water pollution affecting 50,000 downstream residents. Market prices don't reflect environmental costs.
📊 Market Fundamentals
Private Cost:
₹40/unit
Social Cost:
₹55/unit
Market Price:
₹50/unit
External Cost:
₹15/unit
⚠️ Negative Externality: Market Failure Present
Select a policy intervention and run simulation to analyze welfare effects and efficiency outcomes...
🎯 Policy Intervention Designer
💰 Market-Based Instruments
Pigouvian Tax
Tax equal to marginal external damage
Cap-and-Trade System
Tradeable pollution permits with quantity limits
📋 Command & Control
Environmental Standards
Mandatory emission limits with penalties
Technology Mandates
Required adoption of clean technologies
🤝 Coasean Solutions
Property Rights Assignment
Enable private negotiation with clear rights
📈 Welfare Analytics
0
Simulations
0%
Efficiency Gain
+₹0
Welfare Change
₹0
DWL Reduction
🔬 Economic Theory
Pigouvian Correction
Optimal tax equals marginal external damage at efficient quantity
Coase Theorem
Private bargaining achieves efficiency with clear property rights
Market Failure
Externalities cause divergence between private and social costs
Welfare Analysis
Policy effectiveness measured by deadweight loss reduction