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Noxious Facilities, Environmental Damages, and Efficient Randomized Siting

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  • Rudy Santore

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    Abstract

    This paper considers the efficient siting of a noxious facility that causes environmental damages (for example, increased pollution) in the host community. The analysis shows that there can be multiple efficient locations without transfers, and that an efficient location need not have the smallest WTA or WTP. In general, there exist randomized outcomes that are ex ante efficient and that Pareto dominate efficient outcomes. The analysis also shows that a community’s most preferred lottery never provides full insurance. Under some conditions, lotteries with no host compensation are Pareto superior to those with compensation. Copyright Springer Science+Business Media Dordrecht 2014

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    File URL: http://hdl.handle.net/10.1007/s10640-013-9668-5
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    Bibliographic Info

    Article provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.

    Volume (Year): 57 (2014)
    Issue (Month): 1 (January)
    Pages: 101-116

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    Handle: RePEc:kap:enreec:v:57:y:2014:i:1:p:101-116

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    Web page: http://www.springerlink.com/link.asp?id=100263

    Related research

    Keywords: Siting mechanisms; Noxious facilities; Lotteries ; LULU; NIMBY; Q53; R52; R53;

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    References

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    1. Cook, Philip J & Graham, Daniel A, 1977. "The Demand for Insurance and Protection: The Case of Irreplaceable Commodities," The Quarterly Journal of Economics, MIT Press, vol. 91(1), pages 143-56, February.
    2. Horowitz, John K. & McConnell, Kenneth E., 2002. "A Review of WTA/WTP Studies," Journal of Environmental Economics and Management, Elsevier, vol. 44(3), pages 426-447, November.
    3. Mary Riddel & R. Schwer, 2006. "Winners, Losers, and the Nuclear-Waste Dilemma," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 34(2), pages 317-338, 06.
    4. Hanoch, Giora, 1977. "Risk Aversion and Consumer Preferences," Econometrica, Econometric Society, vol. 45(2), pages 413-26, March.
    5. Sullivan, Arthur M., 1992. "Siting noxious facilities: A siting lottery with victim compensation," Journal of Urban Economics, Elsevier, vol. 31(3), pages 360-374, May.
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    7. Keith Waehrer, 1997. "Hazardous Facility Siting When Cost Information is Private: An Application of Multidimensional Mechanism Design," Game Theory and Information 9702004, EconWPA, revised 26 Feb 1997.
    8. Sullivan, Arthur M., 1990. "Victim compensation revisited : Efficiency versus equity in the siting of noxious facilities," Journal of Public Economics, Elsevier, vol. 41(2), pages 211-225, March.
    9. Kunreuther, Howard & Kleindorfer, Paul & Knez, Peter J. & Yaksick, Rudy, 1987. "A compensation mechanism for siting noxious facilities: Theory and experimental design," Journal of Environmental Economics and Management, Elsevier, vol. 14(4), pages 371-383, December.
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    12. Lejano, Raul P. & Davos, Climis A., 2002. "Fair Share: Siting Noxious Facilities as a Risk Distribution Game under Nontransferable Utility," Journal of Environmental Economics and Management, Elsevier, vol. 43(2), pages 251-266, March.
    13. Randall, Alan & Stoll, John R, 1980. "Consumer's Surplus in Commodity Space," American Economic Review, American Economic Association, vol. 70(3), pages 449-55, June.
    14. Mitchell, Robert Cameron & Carson, Richard T, 1986. "Property Rights, Protest, and the Siting of Hazardous Waste Facilities," American Economic Review, American Economic Association, vol. 76(2), pages 285-90, May.
    15. Hanemann, W Michael, 1991. "Willingness to Pay and Willingness to Accept: How Much Can They Differ?," American Economic Review, American Economic Association, vol. 81(3), pages 635-47, June.
    16. Denis Lescop, 2007. "Optimal mechanisms for siting noxious facilities," Review of Economic Design, Springer, vol. 10(4), pages 273-284, March.
    17. Kunreuther, Howard & Kleindorfer, Paul R, 1986. "A Sealed-Bid Auction Mechanism for Siting Noxious Facilities," American Economic Review, American Economic Association, vol. 76(2), pages 295-99, May.
    18. Minehart, Deborah & Neeman, Zvika, 2002. "Effective Siting of Waste Treatment Facilities," Journal of Environmental Economics and Management, Elsevier, vol. 43(2), pages 303-324, March.
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