Deterrence vs. Efficiency To Regulate Nonpoint Source Pollution

Mourad Ali and Patrick Rio

Working Papers from LAMETA, Universtiy of Montpellier

Abstract: 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.

Pages: 18 pages
Date: 2009-12, Revised 2009-12
New Economics Papers: this item is included in nep-cta, nep-env and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:lam:wpaper:09-22

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