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Noxious Facilities, Environmental Damages, and Efficient Randomized Siting

  • Rudy Santore


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    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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    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
    DOI: 10.1007/s10640-013-9668-5
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    1. Marshall, John M, 1984. "Gambles and the Shadow Price of Death," American Economic Review, American Economic Association, vol. 74(1), pages 73-86, March.
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    15. 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.
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