Implementing second-best environmental policy under adverse selection
AbstractA key obstacle to practical application of mechanism design theory to regulation is the difficulty of obtaining consistent beliefs regarding information that theoretical models assume to be commonly held. This article presents a solution to this problem by developing an easily implemented empirical methodology with which the government can use available data to develop beliefs regarding the technology and distribution of types in a regulated sector characterized by hidden information. Results are used to calibrate a second-best land conservation mechanism and evaluate its cost relative to simpler alternatives.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Environmental Economics and Management.
Volume (Year): 57 (2009)
Issue (Month): 3 (May)
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/622870
Empirical contract theory Environmental policy Stochastic frontier analysis Adverse selection;
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