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Transboundary pollution, asymmetric information and social welfare

Author

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  • Slim Ben Youssef

    () (Faculté des Sciences Economiques et de Gestion de Mahdia)

Abstract

We consider two regulator-firm hierarchies with transboundary pollution, and firms may have private information about their marginal cost of production. The pollution of each firm is proportional to its production. The impact of asymmetric information on social welfare can be explained by a positive effect, which is the reduction of transborder pollution one negative effect is the socially costly informational rents captured by firms. We show that, when the damage function is as such, the non-internalization of the transfrontier pollution is sufficiently important, then non-cooperating countries can get a higher expected or ex ante social welfare under incomplete information.

Suggested Citation

  • Slim Ben Youssef, 2004. "Transboundary pollution, asymmetric information and social welfare," Economics Bulletin, AccessEcon, vol. 4(9), pages 1-8.
  • Handle: RePEc:ebl:ecbull:eb-04d80003
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    References listed on IDEAS

    as
    1. Silva, Emilson C. D., 1997. "Decentralized and Efficient Control of Transboundary Pollution in Federal Systems," Journal of Environmental Economics and Management, Elsevier, vol. 32(1), pages 95-108, January.
    2. David Martimort, 1996. "Exclusive Dealing, Common Agency, and Multiprincipals Incentive Theory," RAND Journal of Economics, The RAND Corporation, vol. 27(1), pages 1-19, Spring.
    3. Mansouri, Faysal & Ben Youssef, Slim, 2000. " Regulation and Coordination of International Environmental Externalities with Incomplete Information and Costly Public Funds," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 2(3), pages 365-388.
    4. Chander, Parkash & Tulkens, Henry, 1992. "Theoretical foundations of negotiations and cost sharing in transfrontier pollution problems," European Economic Review, Elsevier, vol. 36(2-3), pages 388-399, April.
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    More about this item

    Keywords

    Expected social welfare;

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation

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