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Noxious Facilities, Environmental Damages, and Efficient Randomized Siting

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  • Rudy Santore

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    Abstract

    This paper considers the efficient siting of a noxious facility that causes environmental damages (for example, increased pollution) in the host community. The analysis shows that there can be multiple efficient locations without transfers, and that an efficient location need not have the smallest WTA or WTP. In general, there exist randomized outcomes that are ex ante efficient and that Pareto dominate efficient outcomes. The analysis also shows that a community’s most preferred lottery never provides full insurance. Under some conditions, lotteries with no host compensation are Pareto superior to those with compensation. Copyright Springer Science+Business Media Dordrecht 2014

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    File URL: http://hdl.handle.net/10.1007/s10640-013-9668-5
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    Article provided by Springer & European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.

    Volume (Year): 57 (2014)
    Issue (Month): 1 (January)
    Pages: 101-116

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    Handle: RePEc:kap:enreec:v:57:y:2014:i:1:p:101-116
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    Keywords: Siting mechanisms; Noxious facilities; Lotteries ; LULU; NIMBY; Q53; R52; R53;

    Find related papers by JEL classification:

    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • R52 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Land Use and Other Regulations
    • R53 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Public Facility Location Analysis; Public Investment and Capital Stock

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    1. Keith Waehrer, 2003. "Hazardous Facility Siting When Cost Information Is Private: An Application of Multidimensional Mechanism Design," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 5(4), pages 605-622, October.
    2. Hanoch, Giora, 1977. "Risk Aversion and Consumer Preferences," Econometrica, Econometric Society, vol. 45(2), pages 413-26, March.
    3. Kunreuther, Howard & Kleindorfer, Paul R, 1986. "A Sealed-Bid Auction Mechanism for Siting Noxious Facilities," American Economic Review, American Economic Association, vol. 76(2), pages 295-99, May.
    4. Marshall, John M, 1984. "Gambles and the Shadow Price of Death," American Economic Review, American Economic Association, vol. 74(1), pages 73-86, March.
    5. Mitchell, Robert Cameron & Carson, Richard T, 1986. "Property Rights, Protest, and the Siting of Hazardous Waste Facilities," American Economic Review, American Economic Association, vol. 76(2), pages 285-90, May.
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    7. Mary Riddel & R. Schwer, 2006. "Winners, Losers, and the Nuclear-Waste Dilemma," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 34(2), pages 317-338, 06.
    8. Kunreuther, Howard & Kleindorfer, Paul & Knez, Peter J. & Yaksick, Rudy, 1987. "A compensation mechanism for siting noxious facilities: Theory and experimental design," Journal of Environmental Economics and Management, Elsevier, vol. 14(4), pages 371-383, December.
    9. Lejano, Raul P. & Davos, Climis A., 2002. "Fair Share: Siting Noxious Facilities as a Risk Distribution Game under Nontransferable Utility," Journal of Environmental Economics and Management, Elsevier, vol. 43(2), pages 251-266, March.
    10. Minehart, Deborah & Neeman, Zvika, 2002. "Effective Siting of Waste Treatment Facilities," Journal of Environmental Economics and Management, Elsevier, vol. 43(2), pages 303-324, March.
    11. Horowitz, John K. & McConnell, K. E., 2003. "Willingness to accept, willingness to pay and the income effect," Journal of Economic Behavior & Organization, Elsevier, vol. 51(4), pages 537-545, August.
    12. Kleindorfer Paul R. & Sertel Murat R., 1994. "Auctioning the Provision of an Indivisible Public Good," Journal of Economic Theory, Elsevier, vol. 64(1), pages 20-34, October.
    13. Denis Lescop, 2007. "Optimal mechanisms for siting noxious facilities," Review of Economic Design, Springer;Society for Economic Design, vol. 10(4), pages 273-284, March.
    14. Hanemann, W Michael, 1991. "Willingness to Pay and Willingness to Accept: How Much Can They Differ?," American Economic Review, American Economic Association, vol. 81(3), pages 635-47, June.
    15. Randall, Alan & Stoll, John R, 1980. "Consumer's Surplus in Commodity Space," American Economic Review, American Economic Association, vol. 70(3), pages 449-55, June.
    16. Philip J. Cook & Daniel A. Graham, 1977. "The Demand for Insurance and Protection: The Case of Irreplaceable Commodities," The Quarterly Journal of Economics, Oxford University Press, vol. 91(1), pages 143-156.
    17. Sullivan, Arthur M., 1990. "Victim compensation revisited : Efficiency versus equity in the siting of noxious facilities," Journal of Public Economics, Elsevier, vol. 41(2), pages 211-225, March.
    18. Sullivan, Arthur M., 1992. "Siting noxious facilities: A siting lottery with victim compensation," Journal of Urban Economics, Elsevier, vol. 31(3), pages 360-374, May.
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