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The Public Management of Risk: Separating Ex Ante and Ex Post Monitors

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  • Hiriart, Yolande
  • Martimort, David
  • Pouyet, Jerome

Abstract

When a firm undertakes risky activities, the conflict between social and private incentives to implement safety care requires public intervention which can take the form of both monetary incentives but also ex ante or ex post monitoring, i.e., before or after an accident occurs. We delineate the optimal scope of monitoring depending on whether public monitors are benevolent or corruptible. We show that separating the ex ante and the ex post monitors increases the likelihood of ex post investigation, helps prevent capture and improves welfare.

Suggested Citation

  • Hiriart, Yolande & Martimort, David & Pouyet, Jerome, 2010. "The Public Management of Risk: Separating Ex Ante and Ex Post Monitors," Institutions and Markets Papers 98454, Fondazione Eni Enrico Mattei (FEEM).
  • Handle: RePEc:ags:feemim:98454
    DOI: 10.22004/ag.econ.98454
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    3. Vera Angelova & Olivier Armantier & Giuseppe Attanasi & Yolande Hiriart, 2014. "Relative performance of liability rules: experimental evidence," Theory and Decision, Springer, vol. 77(4), pages 531-556, December.
    4. Jacopo Bizzotto & Alessandro De Chiara, 2022. "Frequent audits and honest audits," UB Economics Working Papers 2022/417, Universitat de Barcelona, Facultat d'Economia i Empresa, UB School of Economics.
    5. Goldlücke, Susanne & Schmitz, Patrick W., 2018. "Pollution claim settlements reconsidered: Hidden information and bounded payments," European Economic Review, Elsevier, vol. 110(C), pages 211-222.
    6. Pierre Bentata, 2014. "Liability as a complement to environmental regulation: an empirical study of the French legal system," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 16(3), pages 201-228, July.
    7. Alessandro De Chiara & Marco A. Schwarz, 2020. "A Dynamic Theory of Regulatory Capture," Working Papers 2020-12, Faculty of Economics and Statistics, University of Innsbruck.
    8. Bentata Pierre, 2013. "Environmental Regulation and Civil Liability Under Causal Uncertainty: An Empirical Study of the French Legal System," Review of Law & Economics, De Gruyter, vol. 9(2), pages 239-263, October.
    9. Yolande Hiriart & David Martimort, 2006. "The benefits of extended liability," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 562-582, September.
    10. Julien Daubanes & Jean-Charles Rochet, 2019. "The Rise of NGO Activism," American Economic Journal: Economic Policy, American Economic Association, vol. 11(4), pages 183-212, November.
    11. Billette de Villemeur, Etienne & Leroux, Justin, 2016. "A liability approach to climate policy: A thought experiment," MPRA Paper 75497, University Library of Munich, Germany.
    12. Angelucci, Charles & Russo, Antonio, 2012. "Moral Hazard in Hierarchies and Soft Information," TSE Working Papers 12-343, Toulouse School of Economics (TSE).
    13. Pedro Herrera & Oscar Millones, 2011. "¿Cuál Es El Costo De La Contaminación Ambiental Minera Sobre Los Recursos Hídricos En El Perú?," Documentos de Trabajo / Working Papers 2011-321, Departamento de Economía - Pontificia Universidad Católica del Perú.
    14. Pierre Bentata & Karim Barkat, 2012. "Environmental Liability and Regulation: An Empirical Study of the French Institutional Division of Labour," CAE Working Papers 98, Aix-Marseille Université, CERGAM.
    15. De Chiara, Alessandro & Manna, Ester, 2022. "Corruption and the case for safe-harbor regulation," Economics Letters, Elsevier, vol. 216(C).
    16. Billette de Villemeur, Etienne & Leroux, Justin, 2019. "Tradable climate liabilities: A thought experiment," Ecological Economics, Elsevier, vol. 164(C), pages 1-1.
    17. Julien Jacob & Caroline Orset, 2020. "Innovation, information, lobby and tort law under uncertainty," Working Papers of BETA 2020-25, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    18. De Chiara, Alessandro & Manna, Ester, 2022. "Corruption, regulation, and investment incentives," European Economic Review, Elsevier, vol. 142(C).
    19. Reyes Renny & Romano Alessandro & Sottilotta Cecilia Emma, 2015. "Regulatory Impact Assessment in Mexico: A Story of Interest Groups Pressure," The Law and Development Review, De Gruyter, vol. 8(1), pages 99-121, June.
    20. Zhiyong (John) Liu & Zhewei Wang & Zhendong Yin, 2022. "When is duplication of effort a good thing in law enforcement?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 24(4), pages 682-708, August.
    21. Alfredo Dammert & Arturo Vásquez & Raúl García & Victor Zurita & Humberto Ortiz & Erix Ruiz, 2011. "¿Cuál Es El Costo De La Contaminación Ambiental Minerasobre Los Recursos Hídricos En El Perú?: Comentarios," Documentos de Trabajo / Working Papers 2011-326, Departamento de Economía - Pontificia Universidad Católica del Perú.
    22. Hong, Fuhai & Yin, Zhendong, 2020. "Collusion, extortion and the government’s organizational structure," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 1-23.
    23. Etienne Billette de Villemeur & Justin Leroux, 2015. "Track-and-Trade: A liability approach to climate policy," CIRANO Working Papers 2015s-18, CIRANO.

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    More about this item

    Keywords

    Financial Economics;

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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