The Regulator and the Judge : The Optimal Mix in The Control of Environmental Risk
A firm engaged in activities which are environmentally risky has private informationboth on her choice of safety care and on the level of her assets. Public authorities havea stake in implementing a high level of prevention effort and in unveiling the true levelof assets for liability payments. We characterize the optimal second-best public policytowards risk prevention in this asymmetric information setup. This policy takes theform of monitoring both on safety care and on wealth, with probabilities of investigation supplemented with fines. The monitoring takes place both ex ante and ex post, i.e.,before or after an accident has taken place. We show that some sort of separationbetween the regulatory tasks and the legal intervention is called for : at the ex antestage, more resources should be allocated to the monitoring on ?technical? aspects ofthe underlying risk (i.e., the care exercised by the firm) than on ?financial? aspects (i.e.,the firm?s collectable wealth) ; at the ex post stage, monitoring should only concernfinancial aspects.
Volume (Year): 118 (2008)
Issue (Month): 6 ()
|Contact details of provider:|| Web page: http://www.cairn.info/revue-d-economie-politique.htm|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Weitzman, Martin L, 1974.
"Prices vs. Quantities,"
Review of Economic Studies,
Wiley Blackwell, vol. 41(4), pages 477-91, October.
- Cohen, Mark A., 1986. "The costs and benefits of oil spill prevention and enforcement," Journal of Environmental Economics and Management, Elsevier, vol. 13(2), pages 167-188, June.
- Marcel Boyer & Donatella Porrini, 2004.
"Modelling the choice between regulation and liability in terms of social welfare,"
Canadian Journal of Economics,
Canadian Economics Association, vol. 37(3), pages 590-612, August.
- Marcel Boyer & Donatella Porrini, 2002. "Modeling the Choice Between Regulation and Liability in Terms of Social Welfare," CIRANO Working Papers 2002s-13, CIRANO.
- Townsend, Robert M., 1979.
"Optimal contracts and competitive markets with costly state verification,"
Journal of Economic Theory,
Elsevier, vol. 21(2), pages 265-293, October.
- Robert Townsend, 1979. "Optimal contracts and competitive markets with costly state verification," Staff Report 45, Federal Reserve Bank of Minneapolis.
- Kolstad, Charles D & Ulen, Thomas S & Johnson, Gary V, 1990. "Ex Post Liability for Harm vs. Ex Ante Safety Regulation: Substitutes or Complements?," American Economic Review, American Economic Association, vol. 80(4), pages 888-901, September.
- Emons, Winand, 1994.
"The provision of environmental protection measures under incomplete information: An introduction to the theory of mechanism design,"
International Review of Law and Economics,
Elsevier, vol. 14(4), pages 479-491, December.
- Winand Emons, 1993. "The Provision of Environmental Protection Measures under Incomplete Information: An Introduction to the Theory of Mechanism Design," Diskussionsschriften dp9310, Universitaet Bern, Departement Volkswirtschaft.
- Hiriart, Yolande & Martimort, David & Pouyet, Jérôme, 2004.
"On the Optimal Use of Ex Ante Regulation and Ex Post Liability,"
IDEI Working Papers
274, Institut d'Économie Industrielle (IDEI), Toulouse.
- Hiriart, Yolande & Martimort, David & Pouyet, Jerome, 2004. "On the optimal use of ex ante regulation and ex post liability," Economics Letters, Elsevier, vol. 84(2), pages 231-235, August.
- Gary S. Becker, 1968.
"Crime and Punishment: An Economic Approach,"
Journal of Political Economy,
University of Chicago Press, vol. 76, pages 169.
- Marcel Boyer & Donatella Porrini, 2000. "Law versus Regulation: A Political Economy Model of Instrument Choice in Environmental Policy," CIRANO Working Papers 2000s-57, CIRANO.
- Gale, Douglas & Hellwig, Martin, 1985. "Incentive-Compatible Debt Contracts: The One-Period Problem," Review of Economic Studies, Wiley Blackwell, vol. 52(4), pages 647-63, October.
- Boyd, James, 2001. "Financial Responsibility for Environmental Obligations: Are Bonding and Assurance Rules Fulfilling Their Promise?," Discussion Papers dp-01-42, Resources For the Future.
- Hiriart, Yolande & Martimort, David & Pouyet, Jérôme, 2005. "The Public Management of Environmental Risk: Separating Ex Ante and Ex Post Monitors," CEPR Discussion Papers 4992, C.E.P.R. Discussion Papers.
- David P. Baron & David Besanko, 1984. "Regulation, Asymmetric Information, and Auditing," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 447-470, Winter.
- Lewis, Tracy R & Sappington, David E M, 2000. "Contracting with Wealth-Constrained Agents," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(3), pages 743-67, August.
- Lewis, Tracy R & Sappington, David E M, 2001. "Optimal Contracting with Private Knowledge of Wealth and Ability," Review of Economic Studies, Wiley Blackwell, vol. 68(1), pages 21-44, January.
- Ringleb, Al H & Wiggins, Steven N, 1990. "Liability and Large-Scale, Long-term Hazards," Journal of Political Economy, University of Chicago Press, vol. 98(3), pages 574-95, June.
When requesting a correction, please mention this item's handle: RePEc:cai:repdal:redp_186_0941. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jean-Baptiste de Vathaire)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.