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Empowering neighbors versus imposing regulations: An experimental analysis of pollution reduction schemes

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  • Cason, Timothy N.
  • Gangadharan, Lata

Abstract

This paper presents an experimental study of two mechanisms that influence incentives to reduce ambient pollution levels. In the formal mechanism individuals face a penalty if the group generates total pollution that exceeds a specified target, whereas in the informal mechanism individuals can choose to incur costs to punish each other after observing their group members' emissions. We examine the effectiveness of these mechanisms, in isolation and in combination. The results suggest that the formal targeting mechanism is significantly more effective than informal peer punishment in reducing pollution and increasing efficiency. Peer punishment however improves the performance of the formal mechanism.

Suggested Citation

  • Cason, Timothy N. & Gangadharan, Lata, 2013. "Empowering neighbors versus imposing regulations: An experimental analysis of pollution reduction schemes," Journal of Environmental Economics and Management, Elsevier, vol. 65(3), pages 469-484.
  • Handle: RePEc:eee:jeeman:v:65:y:2013:i:3:p:469-484 DOI: 10.1016/j.jeem.2012.09.001
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    References listed on IDEAS

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    Cited by:

    1. Lata Gangadharan & Nikos Nikiforakis & Marie Claire Villeval, 2015. "Equality concerns and the limits of self-governance in heterogeneous populations," Working Papers 1525, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    2. repec:eee:eecrev:v:100:y:2017:i:c:p:143-156 is not listed on IDEAS
    3. repec:eee:jeeman:v:86:y:2017:i:c:p:48-67 is not listed on IDEAS
    4. Gangadharan, Lata & Nikiforakis, Nikos & Villeval, Marie Claire, 2017. "Normative conflict and the limits of self-governance in heterogeneous populations," European Economic Review, Elsevier, vol. 100(C), pages 143-156.
    5. repec:kap:regeco:v:51:y:2017:i:3:d:10.1007_s11149-017-9330-1 is not listed on IDEAS
    6. James Shortle & Richard D. Horan, 2013. "Policy Instruments for Water Quality Protection," Annual Review of Resource Economics, Annual Reviews, vol. 5(1), pages 111-138, June.

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