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The ground for negotiation: Zoning for risk reduction around hazardous plants

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  • Grislain-Letrémy, Céline
  • Villeneuve, Bertrand

Abstract

The industrialists are liable for any damage they cause to neighboring households. Consequently, households do not have to pay for the risk they create by locating in exposed areas. A common and efficient self-insurance strategy for the firm is to freeze land, or to negotiate land-use restrictions. When people understand only simple messages about risk, the boundaries of the building zone are the ground for negotiation with the mayor. Typical scenarios regarding the distribution of bargaining power between the firm and the mayor are examined. In the comparative statics, we show how red zones are revised as technology or demography change. Further, we give the conditions for a purple zone (limit red zone as the population grows) and a green zone (limit inhabitable zone as the risk grows) to exist.

Suggested Citation

  • Grislain-Letrémy, Céline & Villeneuve, Bertrand, 2020. "The ground for negotiation: Zoning for risk reduction around hazardous plants," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 657-677.
    • Handle: RePEc:eee:jeborg:v:180:y:2020:i:c:p:657-677
    DOI: 10.1016/j.jebo.2019.11.022
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    More about this item

    Keywords

    Industrial disasters; Self-insurance; Externalities; Behavioral constraint; Labels in risk regulation; Land-use negotiation;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • R52 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Land Use and Other Regulations

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