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Schemes to Regulate Non-Point Water Pollution: Making Sense of Experimental Results

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  • Pushkarskaya, Helen N.

Abstract

Three theoretical non-point water pollution control schemes were tested repeatedly in experimental studies - tax-subsidy scheme (K. Segerson, 1988), collective fining (Xepapadeas, 1991) and random fining (Xepapadeas, 1991). Camacho and Requate (2004) summarized results reported by Spraggon (2002), Vossler et al (2002), Cochard et al (2002), and Alpizar et al (2004) and replicated their experiments. In this paper I will discuss similarity and differences among all the reported results and in particular the following two. First, both collective fining and random fining induce abatement under the target, their performance deteriorates over time, and is relatively consistent over the replications. Second, tax-subsidy scheme induced abatement over the target, its performance is consistent over time, but not over the replications. Three different theories offer an explanation of how individuals behave as members of a group: non-cooperative game theory (individuals choose to maximize their individual profits), cooperative game theory (individuals within a group choose a coalition that would maximize profit of each member of the coalition), evolutionary game theory (individuals choose to maximize their relative profits - difference between individual profit and average profit in the group). Each of these theories suggests a specific equilibrium for each of the nonpoint control schemes mentioned above, but individually does not explain experimental results. I will demonstrate that multi-objective optimization, where individuals are interested in maximizing a bundle (individual profit; payoff from a coalition, relative profit) is consistent with experimental data and accounts for recognized individual differences in players within a group (i.e. Kurzban & Houser, 2005).

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  • Pushkarskaya, Helen N., 2006. "Schemes to Regulate Non-Point Water Pollution: Making Sense of Experimental Results," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25507, International Association of Agricultural Economists.
  • Handle: RePEc:ags:iaae06:25507
    DOI: 10.22004/ag.econ.25507
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    References listed on IDEAS

    as
    1. 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.
    2. François Cochard & Marc Willinger & Anastasios Xepapadeas, 2005. "Efficiency of Nonpoint Source Pollution Instruments: An Experimental Study," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 30(4), pages 393-422, April.
    3. Camacho Cuena, Eva & Requate, Till, 2004. "Collective and Random Fining versus Tax/Subsidy - Schemes to Regulate Non-Point Pollution: An Experimental Study," Economics Working Papers 2004-10, Christian-Albrechts-University of Kiel, Department of Economics.
    4. Vossler, Christian A. & Poe, Gregory L. & Schulze, William D. & Segerson, Kathleen, 2002. "An Experimental Test of Ambient-Based Mechanisms for Nonpoint Source Pollution Control," Working Papers 127334, Cornell University, Department of Applied Economics and Management.
    5. Segerson, Kathleen, 1988. "Uncertainty and incentives for nonpoint pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 15(1), pages 87-98, March.
    6. Francisco Alpízar & Till Requate & Albert Schram, 2004. "Collective versus Random Fining: An Experimental Study on Controlling Ambient Pollution," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 29(2), pages 231-252, October.
    7. François Cochard & Marc Willinger & Anastasios Xepapadeas, 2002. "Efficiency of Nonpoint Source Pollution Instruments with Externality Among Polluters:An Experimental Study," Working Papers of BETA 2002-20, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
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