Pollution Standards, Costly Monitoring and Fines
AbstractWe investigate the features of optimal regulatory policies composed of pollution standards and probabilities of inspection, where fines for non-compliance depend not only on the degree of violation but alson on nongravity factors.We show that optimal policies can induce either compliance or noncompliance with the standards, the latter being more plausible when monitoring costs are large and, surprisingly, when gravity-based fines are large.Also, both tghe convexity of the sanctions and the level of the non-gravity-based penalties play a key role as to whether optimal policies induce noncompliance.
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Bibliographic InfoPaper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2005-9.
Date of creation: 2005
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standards; monitoring; convex fines; gravity-based sanctions; non gravity-based sanctions; 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-AGR-2005-03-06 (Agricultural Economics)
- NEP-ALL-2005-03-06 (All new papers)
- NEP-ENV-2005-03-06 (Environmental Economics)
- NEP-LAW-2005-03-06 (Law & Economics)
- NEP-RES-2005-03-06 (Resource Economics)
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