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Transaction Costs And Agricultural Nonpoint-Source Water Pollution Control Policies

  • Smith, Rodney B.W.
  • Tomasi, Theodore D.
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    Mechanism design theory is used to develop the properties of optimal pollution control incentive schemes in the presence of adverse selection, moral hazard, and transaction costs. The model presented here shows (a) with no deadweight costs (transaction costs) , first-best allocations are always possible; (b) in the presence of transaction costs (caused by raising taxes), only second-best allocations are feasible; and (c) the conditions under which the optimal incentive scheme implementing second-best allocations will be a nonlinear tax, a standard(s), or a combination of both taxes and standard(s).

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    File URL: http://purl.umn.edu/30768
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    Article provided by Western Agricultural Economics Association in its journal Journal of Agricultural and Resource Economics.

    Volume (Year): 20 (1995)
    Issue (Month): 02 (December)
    Pages:

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    Handle: RePEc:ags:jlaare:30768
    Contact details of provider: Web page: http://waeaonline.org/
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    1. Dasgupta, Partha S & Hammond, Peter J & Maskin, Eric S, 1979. "The Implementation of Social Choice Rules: Some General Results on Incentive Compatibility," Review of Economic Studies, Wiley Blackwell, vol. 46(2), pages 185-216, April.
    2. Lee, Dwight R. & Misiolek, Walter S., 1986. "Substituting pollution taxation for general taxation: Some implications for efficiency in pollutions taxation," Journal of Environmental Economics and Management, Elsevier, vol. 13(4), pages 338-347, December.
    3. Guesnerie, Roger & Laffont, Jean-Jacques, 1984. "A complete solution to a class of principal-agent problems with an application to the control of a self-managed firm," Journal of Public Economics, Elsevier, vol. 25(3), pages 329-369, December.
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