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Collective penalties and inducement of self-reporting

Author

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  • Katrin Millock

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • David Zilberman

    (ARE - Department of Agricultural and Resource Economics [Berkeley] - UC Berkeley - University of California [Berkeley] - UC - University of California)

Abstract

Random accidents can be contained by collective penalties. These penalties are not likely to be enforced but rather induce self-reporting that enhances welfare due to early containment. Self-reporting under collective penalties increases overall welfare, but may increase expected environmental cost. Even when regulation is constrained by an upper limit on the acceptable collective penalty, the threat of collective penalties can induce an incentive-compatible mutual insurance scheme under which a side-payment is made to the agent that self-reports an accident. This self-reporting mechanism is welfare-improving, but first-best outcomes can only be obtained when the collective penalty is unconstrained, or when an honor system applies. In cases when there is a new externality that requires fast response (avian flu), collective penalties can compliment or substitute for monitoring.

Suggested Citation

  • Katrin Millock & David Zilberman, 2006. "Collective penalties and inducement of self-reporting," Post-Print halshs-00118778, HAL.
    • Handle: RePEc:hal:journl:halshs-00118778
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00118778
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    References listed on IDEAS

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    2. Etienne, Julien, 2010. "Self-reporting untoward events to external controllers: accounting for reporting failure by a top tier chemical plant," LSE Research Online Documents on Economics 36546, London School of Economics and Political Science, LSE Library.

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    More about this item

    Keywords

    enforcement; collective penalties; Ambient tax; self-reporting; déclaration; application; pénalités collectives; Taxe d'habitation;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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