Getting Polluters to Tell the Truth
We study the problem of a regulator who must control the emissions of a given pollutant from a series of industries when the firms' abatement costs are unknown. We develop a mechanism in which the regulator asks firms to report their abatement costs and implements the most stringent emissions standard consistent with the firms' declarations. He also inspects one of the firms in each industry which declared the cost structure consistent with the least stringent emissions standard and with an arbitrarily small probability, he discovers whether the report was true or not. The firm is punished with an arbitrarily small fine if and only if its report was false. This mechanism is simple, is implementable in practice, its unique equilibrium is truth telling by firms, it implements the first best pollution standards and shares some features of the regulatory processes actually observed in reality.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Anil Arya & Jonathan Glover, . "Maintaining Auditor Independence," Corporate Finance & Organizations _017, Ohio State University.
- Clifford S. Russell & Philip T. Powell, 1996. "Choosing Environmental Policy Tools: Theoretical Cautions and Practical Considerations," IDB Publications (Working Papers) 25258, Inter-American Development Bank.
- Ignacio Ortu�O-Ortin & John E. Roemer, 1993. "Politically Realistic Implementation With Inspection: The Equity-Honesty-Welfare Trade-Off," Economics and Politics, Wiley Blackwell, vol. 5(3), pages 255-270, November.
- Bohm, Peter & Russell, Clifford S., 1985. "Comparative analysis of alternative policy instruments," Handbook of Natural Resource and Energy Economics, in: A. V. Kneese† & J. L. Sweeney (ed.), Handbook of Natural Resource and Energy Economics, edition 1, volume 1, chapter 10, pages 395-460 Elsevier.
- Matthew 0. Jackson, 1989.
"Implementation in Undominated Strategies - A Look at Bounded Mechanisms,"
833, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Jackson, Matthew O, 1992. "Implementation in Undominated.Strategies: A Look at Bounded Mechanisms," Review of Economic Studies, Wiley Blackwell, vol. 59(4), pages 757-75, October.
- Palfrey, Thomas R & Srivastava, Sanjay, 1991. "Nash Implementation Using Undominated Strategies," Econometrica, Econometric Society, vol. 59(2), pages 479-501, March.
- Matthew O. Jackson & Sanjay Srivastava, 1992. "Characterizations of Game Theoretic Solutions which Lead to Impossibility Theorems," Discussion Papers 1004, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Kim-Sau Chung & Jeffrey C. Ely, 2003.
"Implementation with Near-Complete Information,"
Econometric Society, vol. 71(3), pages 857-871, 05.
- Revesz, Richard L. & Stavins, Robert N., 2007. "Environmental Law," Handbook of Law and Economics, Elsevier.
- Matthew O. Jackson, 1990.
"Undominated Nash Implementation in Bounded Mechanisms,"
966, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Jackson Matthew O. & Palfrey Thomas R. & Srivastava Sanjay, 1994. "Undominated Nash Implementation in Bounded Mechanisms," Games and Economic Behavior, Elsevier, vol. 6(3), pages 474-501, May.
- Matthew, Jackson O. & Palfrey, Thomas R. & Srivastava, Sanjay., 1990. "Undominated Nash Implementation in Bounded Mechanism," Working Papers 754, California Institute of Technology, Division of the Humanities and Social Sciences.
- Dasgupta, Partha & Hammond, Peter & Maskin, Eric, 1980. "On Imperfect Information and Optimal Pollution Control," Review of Economic Studies, Wiley Blackwell, vol. 47(5), pages 857-60, October.
- Kwerel, Evan, 1977. "To Tell the Truth: Imperfect Information and Optimal Pollution Control," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 595-601, October.
- Mookherjee, Dilip & Png, Ivan, 1989. "Optimal Auditing, Insurance, and Redistribution," The Quarterly Journal of Economics, MIT Press, vol. 104(2), pages 399-415, May.
- Ortuno-Ortin, I. & Roemer, J.E., 1988. "Implementation With Inspection," Papers 327, California Davis - Institute of Governmental Affairs.
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpmi:0504008. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA)
If references are entirely missing, you can add them using this form.