A Model of Endogeneous Oil Spill Regulation
This paper presents a model of endogenous oil spill regulation where the severity of regulations is shown to be a function of the size of recent spills. The regulator chooses how much to regulate in order to maximize political capital when regulations are rigid downwards and the distribution of spills is not known with certainty. Very large spills are shown to cause large increases in the regulation level. In the event that an unlikely disastrous spill is realized, major regulatory reform may take place which would take the regulations to too high a level.
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- Cohen, Mark A, 1987. "Optimal Enforcement Strategy to Prevent Oil Spills: An Application of a Principal-Agent Model with Moral Hazard," Journal of Law and Economics, University of Chicago Press, vol. 30(1), pages 23-51, April.
- Harford, Jon D., 1978. "Firm behavior under imperfectly enforceable pollution standards and taxes," Journal of Environmental Economics and Management, Elsevier, vol. 5(1), pages 26-43, March.
- Milton Harris & Bengt Holmstrom, 1982. "A Theory of Wage Dynamics," Review of Economic Studies, Oxford University Press, vol. 49(3), pages 315-333.
- Sarin, Rakesh K. & Scherer, Charles R., 1976. "Optimal oil tanker size with regard to environmental impact of oil spills," Journal of Environmental Economics and Management, Elsevier, vol. 3(3), pages 226-235, October.
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