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Deterrence vs. Efficiency To Regulate Nonpoint Source Pollution


  • Mourad Ali
  • Patrick Rio


In the context of nonpoint source pollution the regulator can not attribute individually the responsibility of pollution because of informational asymmetry which makes the costs of monitoring of individual emission very high. This grounds a moral hazard problem. We analyse group performance based instruments to regulate this kind of informational problem. In particular, we assess randomand collective fining schemes with respect to their deterrence and efficiency. We show that a collective fine scheme is more deterrent than a random fine scheme. However, the analysis of efficiency is less categorical between these two schemes. The efficiency depends on the number of non-compliant agents. If the number of non-compliant agents is high it is better to implement a collective fine scheme. If the number of non-compliant agents is small it is better to implement a random fine scheme.

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  • Mourad Ali & Patrick Rio, 2009. "Deterrence vs. Efficiency To Regulate Nonpoint Source Pollution," Working Papers 09-22, LAMETA, Universtiy of Montpellier, revised Dec 2009.
  • Handle: RePEc:lam:wpaper:09-22

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    6. Segerson, Kathleen & Wu, JunJie, 2006. "Nonpoint pollution control: Inducing first-best outcomes through the use of threats," Journal of Environmental Economics and Management, Elsevier, vol. 51(2), pages 165-184, March.
    7. Francisco AlpĂ­zar & Till Requate & Albert Schram, 2004. "Collective versus Random Fining: An Experimental Study on Controlling Ambient Pollution," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 29(2), pages 231-252, October.
    8. Xepapadeas, A. P., 1991. "Environmental policy under imperfect information: Incentives and moral hazard," Journal of Environmental Economics and Management, Elsevier, vol. 20(2), pages 113-126, March.
    9. Shortle, James S & Horan, Richard D, 2001. " The Economics of Nonprofit Pollution Control," Journal of Economic Surveys, Wiley Blackwell, vol. 15(3), pages 255-289, July.
    10. Cabe, Richard & Herriges, Joseph A., 1992. "The Regulation of Non-Point Sources of Pollution Under Imperfect and Asymmetric Information," Staff General Research Papers Archive 10787, Iowa State University, Department of Economics.
    11. Cabe, Richard & Herriges, Joseph A., 1992. "The regulation of non-point-source pollution under imperfect and asymmetric information," Journal of Environmental Economics and Management, Elsevier, vol. 22(2), pages 134-146, March.
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