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Ambient-based pollution mechanisms: A comparison of homogeneous and heterogeneous groups of emitters

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  • Suter, Jordan F.
  • Vossler, Christian A.
  • Poe, Gregory L.

Abstract

Over the last two decades, ambient-based tax mechanisms have been offered as a potential solution to the problem of nonpoint source water pollution. Previous theoretical analyses suggest that the performance of ambient-based tax mechanisms does not depend on firm characteristics, such as size, whilst policy discussions advocate that such mechanisms are best suited for regulating relatively homogeneous firms. Using controlled laboratory experiments, we provide empirical evidence that the distribution of firm sizes does have a significant impact on observed group decision making and further that heterogeneity has the potential to generate both some relatively desirable outcomes as well as some outcomes that are not attractive. These results suggest that richer theoretical models that capture important strategic interactions and social preferences are needed to better describe laboratory behavior and, by extension, behavior in potential policy settings.

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Bibliographic Info

Article provided by Elsevier in its journal Ecological Economics.

Volume (Year): 68 (2009)
Issue (Month): 6 (April)
Pages: 1883-1892

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Handle: RePEc:eee:ecolec:v:68:y:2009:i:6:p:1883-1892

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Web page: http://www.elsevier.com/locate/ecolecon

Related research

Keywords: Nonpoint source pollution Ambient taxes Firm heterogeneity Laboratory experiments Dairy farms;

References

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  1. Dirk Engelmann & Martin Strobel, 2004. "Inequality Aversion, Efficiency, and Maximin Preferences in Simple Distribution Experiments," American Economic Review, American Economic Association, vol. 94(4), pages 857-869, September.
  2. Xepapadeas, A. P., 1991. "Environmental policy under imperfect information: Incentives and moral hazard," Journal of Environmental Economics and Management, Elsevier, vol. 20(2), pages 113-126, March.
  3. Larry Karp, 2005. "Nonpoint Source Pollution Taxes and Excessive Tax Burden," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 31(2), pages 229-251, 06.
  4. Gary Charness & Matthew Rabin, 2003. "Understanding Social Preferences with Simple Tests," General Economics and Teaching 0303002, EconWPA.
  5. Horan, Richard D. & Shortle, James S. & Abler, David G., 1998. "Ambient Taxes When Polluters Have Multiple Choices," Journal of Environmental Economics and Management, Elsevier, vol. 36(2), pages 186-199, September.
  6. Kathleen Segerson & JunJie Wu, 2003. "Nonpoint Pollution Control: Inducing First-best Outcomes through the Use of Threats," Working papers 2003-03, University of Connecticut, Department of Economics, revised Aug 2004.
  7. Hansen, Lars Garn & Romstad, Eirik, 2007. "Non-point source regulation -- A self-reporting mechanism," Ecological Economics, Elsevier, vol. 62(3-4), pages 529-537, May.
  8. Knoblauch, Wayne A. & Putnam, Linda D. & Karszes, Jason, 2001. "Dairy Farm Management: Business Summary, New York State, 2000," Research Bulletins 122646, Cornell University, Department of Applied Economics and Management.
  9. François Cochard & Marc Willinger & Anastasios Xepapadeas, 2005. "Efficiency of Nonpoint Source Pollution Instruments: An Experimental Study," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 30(4), pages 393-422, 04.
  10. Suter, Jordan F. & Vossler, Christian A. & Poe, Gregory L. & Segerson, Kathleen, 2008. "AJAE Appendix: Experiments on Damage-Based Ambient Taxes for Nonpoint Source Polluters," American Journal of Agricultural Economics Appendices, Agricultural and Applied Economics Association, vol. 90(1), February.
  11. Spraggon, John, 2002. "Exogenous targeting instruments as a solution to group moral hazards," Journal of Public Economics, Elsevier, vol. 84(3), pages 427-456, June.
  12. Christian A. Vossler & Gregory L. Poe & William D. Schulze & Kathleen Segerson, 2006. "Communication and Incentive Mechanisms Based on Group Performance: An Experimental Study of Nonpoint Pollution Control," Economic Inquiry, Western Economic Association International, vol. 44(4), pages 599-613, October.
  13. Francisco Alpízar & Till Requate & Albert Schram, 2004. "Collective versus Random Fining: An Experimental Study on Controlling Ambient Pollution," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 29(2), pages 231-252, October.
  14. Lars Hansen, 1998. "A Damage Based Tax Mechanism for Regulation of Non-Point Emissions," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 12(1), pages 99-112, July.
  15. Romstad, Eirik, 2003. "Team approaches in reducing nonpoint source pollution," Ecological Economics, Elsevier, vol. 47(1), pages 71-78, November.
  16. Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
  17. Jordan F. Suter & Christian A. Vossler & Gregory L. Poe & Kathleen Segerson, 2008. "Experiments on Damage-Based Ambient Taxes for Nonpoint Source Polluters," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(1), pages 86-102.
  18. Cabe, Richard & Herriges, Joseph A., 1992. "The regulation of non-point-source pollution under imperfect and asymmetric information," Journal of Environmental Economics and Management, Elsevier, vol. 22(2), pages 134-146, March.
  19. Spraggon, John, 2004. "Testing ambient pollution instruments with heterogeneous agents," Journal of Environmental Economics and Management, Elsevier, vol. 48(2), pages 837-856, September.
  20. Alfons Weersink & John R. Livernois & Jason F. Shogren & James S. Shortle, 1998. "Economic Instruments and Environmental Policy in Agriculture," Canadian Public Policy, University of Toronto Press, vol. 24(3), pages 309-327, September.
  21. Gregory L. Poe & William D. Schulze & Kathleen Segerson & Jordan F. Suter & Christian A. Vossler, 2004. "Exploring the Performance of Ambient-Based Policy Instruments When Nonpoint Source Polluters Can Cooperate," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(5), pages 1203-1210.
  22. Segerson, Kathleen, 1988. "Uncertainty and incentives for nonpoint pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 15(1), pages 87-98, March.
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Citations

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Cited by:
  1. Cason, Timothy N. & Gangadharan, Lata, 2013. "Empowering neighbors versus imposing regulations: An experimental analysis of pollution reduction schemes," Journal of Environmental Economics and Management, Elsevier, vol. 65(3), pages 469-484.
  2. François Cochard & Anne Rozan, 2010. "Taxe ambiante : un outil adapté à la lutte contre les coulées de boue ? Une étude expérimentale," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement, INRA Department of Economics, vol. 91(3), pages 296-326.
  3. James Shortle & Richard D. Horan, 2013. "Policy Instruments for Water Quality Protection," Annual Review of Resource Economics, Annual Reviews, vol. 5(1), pages 111-138, June.
  4. Anastasios Xepapadeas, 2011. "The Economics of Non-Point-Source Pollution," Annual Review of Resource Economics, Annual Reviews, vol. 3(1), pages 355-373, October.
  5. Jordan F. Suter & Kathleen Segerson & Christian A. Vossler & Gregory L. Poe, 2010. "Voluntary-Threat Approaches to Reduce Ambient Water Pollution," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(4), pages 1195-1213.

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