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Discretionary enforcement and strategic interactions between firms, regulatory agency and justice department: a theoretical and empirical investigation

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  • Germani, Anna Rita
  • Morone, Andrea
  • Morone, Piergiuseppe
  • Scaramozzino, Pasquale

Abstract

This paper presents a game theoretic morphological analysis of the U.S. environmental authorities’ (i.e., EPA and DOJ) behavioural mechanisms, based on strategic interactions among the players. The models explore the role of discretion that such authorities enjoy, either in deciding how to pursue environmental violations (investigative and prosecutorial discretion) or in judging them (judicial discretion). The purpose is to identify both the optimal firms’ behaviour in terms of compliance, and the DOJ’s and EPA’s optimal strategies in terms of enforcement actions to undertake. Consistent with the setting of the game theory models, the role of EPA and DOJ in deterring firms from polluting is, then, empirically tested, by means of a laboratory experiment. Laboratory evidence on compliance behaviour of firms when faced with enforcement conditions predicted by the theoretical models set up is discussed for the different experimental treatments performed.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 51369.

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Date of creation: Sep 2013
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Handle: RePEc:pra:mprapa:51369

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Keywords: environmental enforcement; discretion; game theory; experimental economics.;

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  22. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
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  24. Stafford, Sarah L., 2002. "The Effect of Punishment on Firm Compliance with Hazardous Waste Regulations," Journal of Environmental Economics and Management, Elsevier, vol. 44(2), pages 290-308, September.
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