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Watershed Nutrient Trading Under Asymmetric Information

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  • Johansson, Robert C.

Abstract

This study evaluates first- and second-best trading policies for regulating watershed phosphorus under asymmetric information. The trading policies are differentiated on the degree to which regulators observe point and nonpoint source abatement efforts. The efficiency losses attributable to these informational asymmetries and those of the second-best policies can be measured in social welfare, and provide regulators the shadow value of foregoing first-best measures. Given representative monitoring costs from national water monitoring programs, it is shown that under asymmetric information, the chosen second-best trading policies outperform first-best policies by 11% in the control of watershed nutrient pollution.

Suggested Citation

  • Johansson, Robert C., 2002. "Watershed Nutrient Trading Under Asymmetric Information," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 31(2), pages 1-13, October.
    • Handle: RePEc:ags:arerjl:31382
    DOI: 10.22004/ag.econ.31382
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    Cited by:

    1. Claassen, Roger & Cattaneo, Andrea & Johansson, Robert, 2008. "Cost-effective design of agri-environmental payment programs: U.S. experience in theory and practice," Ecological Economics, Elsevier, vol. 65(4), pages 737-752, May.
    2. Ancev, Tihomir & Stoecker, Arthur L. & Storm, Daniel E. & White, Michael J., 2006. "The Economics of Efficient Phosphorus Abatement in a Watershed," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 31(3), pages 1-20, December.
    3. Kaplan, Jonathan D. & Howitt, Richard E. & Farzin, Y. Hossein, 2003. "An information-theoretical analysis of budget-constrained nonpoint source pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 46(1), pages 106-130, July.
    4. Howitt, Richard E. & Kaplan, Jonathan D. & Johnson, Michael L. & Viers, Joshua H., 2004. "Managing Water Temperature Tmdls Under Economic And Environmental Uncertainty," 2004 Annual meeting, August 1-4, Denver, CO 20182, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    5. Nguyen, Nga & Shortle, James S., 2006. "Transactions Costs and Point-Nonpoint Source Water Pollution Trading," 2006 Annual meeting, July 23-26, Long Beach, CA 21096, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    6. Johansson, Robert C. & Gowda, Prasanna H. & Mulla, David J. & Dalzell, Brent J., 2004. "Metamodelling phosphorus best management practices for policy use: a frontier approach," Agricultural Economics, Blackwell, vol. 30(1), pages 63-74, January.
    7. Claassen, Roger & Breneman, Vincent E. & Bucholtz, Shawn & Cattaneo, Andrea & Johansson, Robert C. & Morehart, Mitchell J., 2004. "Environmental Compliance In U.S. Agricultural Policy: Past Performance And Future Potential," Agricultural Economic Reports 34033, United States Department of Agriculture, Economic Research Service.

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