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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
    as

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    References listed on IDEAS

    as
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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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