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Watershed Nutrient Trading Under Asymmetric Information

  • Johansson, Robert C.

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.

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Article provided by Northeastern Agricultural and Resource Economics Association in its journal Agricultural and Resource Economics Review.

Volume (Year): 31 (2002)
Issue (Month): 2 (October)
Pages:

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Handle: RePEc:ags:arerjl:31382
Contact details of provider: Web page: http://www.narea.org/

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