Optimal Environmental Standards under Asymmetric Information and Imperfect Enforcement
AbstractWe study optimal policies composed of pollution standards, probabilities of inspection and fines dependant on the degree of noncompliance with the standards, in a context where regulated firms own private information.In contrast with previous literature, we show that optimal policies, being either pooling or separating, can imply violations to strictly positive standards.This results crucially depends on the monitoring costs, the types of firms and the regulator's degree of uncertainty.
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Bibliographic InfoPaper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2005-10.
Date of creation: 2005
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Web page: http://center.uvt.nl
standard-setting; costly inspections; convex fines; asymmetric information; noncompliance;
Find related papers by JEL classification:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- K32 - Law and Economics - - Other Substantive Areas of Law - - - Environmental, Health, and Safety Law
- K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-02-20 (All new papers)
- NEP-ENV-2005-02-20 (Environmental Economics)
- NEP-LAW-2005-02-20 (Law & Economics)
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