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Deterrence vs. Efficiency To Regulate Nonpoint Source Pollution

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  • Mourad Ali
  • Patrick Rio
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    Abstract

    In the context of nonpoint source pollution the regulator can not attribute individually the responsibility of pollution because of informational asymmetry which makes the costs of monitoring of individual emission very high. This grounds a moral hazard problem. We analyse group performance based instruments to regulate this kind of informational problem. In particular, we assess randomand collective fining schemes with respect to their deterrence and efficiency. We show that a collective fine scheme is more deterrent than a random fine scheme. However, the analysis of efficiency is less categorical between these two schemes. The efficiency depends on the number of non-compliant agents. If the number of non-compliant agents is high it is better to implement a collective fine scheme. If the number of non-compliant agents is small it is better to implement a random fine scheme.

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    File URL: http://www.lameta.univ-montp1.fr/Documents/DR2009-22.pdf
    File Function: First version, 2009
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    Bibliographic Info

    Paper provided by LAMETA, Universtiy of Montpellier in its series Working Papers with number 09-22.

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    Length: 18 pages
    Date of creation: Dec 2009
    Date of revision: Dec 2009
    Handle: RePEc:lam:wpaper:09-22

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    1. Thomas J. Miceli & Kathleen Segerson, 2004. "Punishing the Innocent along with the Guilty: The Economics of Individual versus Group Punishment," Working papers 2004-37, University of Connecticut, Department of Economics.
    2. Francisco AlpĂ­zar & Till Requate & Albert Schram, 2004. "Collective versus Random Fining: An Experimental Study on Controlling Ambient Pollution," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 29(2), pages 231-252, October.
    3. Herriges, Joseph A. & Shogren, Jason F. & Govindasamy, R., 1994. "Budget Balancing Incentive Mechanisms," Staff General Research Papers 1503, Iowa State University, Department of Economics.
    4. Xepapadeas, A. P., 1991. "Environmental policy under imperfect information: Incentives and moral hazard," Journal of Environmental Economics and Management, Elsevier, vol. 20(2), pages 113-126, March.
    5. Kathleen Segerson & JunJie Wu, 2003. "Nonpoint Pollution Control: Inducing First-best Outcomes through the Use of Threats," Working papers 2003-03, University of Connecticut, Department of Economics, revised Aug 2004.
    6. Horan, Richard D. & Shortle, James S. & Abler, David G., 1998. "Ambient Taxes When Polluters Have Multiple Choices," Journal of Environmental Economics and Management, Elsevier, vol. 36(2), pages 186-199, September.
    7. Cabe, Richard & Herriges, Joseph A., 1992. "The Regulation of Non-Point Sources of Pollution Under Imperfect and Asymmetric Information," Staff General Research Papers 10787, Iowa State University, Department of Economics.
    8. Segerson, Kathleen, 1988. "Uncertainty and incentives for nonpoint pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 15(1), pages 87-98, March.
    9. Cabe, Richard & Herriges, Joseph A., 1992. "The regulation of non-point-source pollution under imperfect and asymmetric information," Journal of Environmental Economics and Management, Elsevier, vol. 22(2), pages 134-146, March.
    10. Steffan Berridge & Jacek Krawczyk, . "Relaxation Algorithms in Finding Nash Equilibrium," Computing in Economics and Finance 1997 159, Society for Computational Economics.
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