Little Green Lies: Optimal environmental regulation with partially verifiable information

Alistair Munro

No 16-16, GRIPS Discussion Papers from National Graduate Institute for Policy Studies

Abstract: When the set of possible messages depends on the actual state of the world, optimal incentive schemes to control environmental problems may not always satisfy the revelation principle. As a result, in equilibrium some agents may send false messages, particularly when the information rents in the truth- telling scheme are high. I characterise optimal pollution regulation schemes and produce some numerical examples to show mechanisms which allow some dishonesty in equilibrium may frequently outperform truth-telling schemes.

Pages: 26 pages
Date: 2016-09
New Economics Papers: this item is included in nep-ene, nep-env, nep-mic and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:ngi:dpaper:16-16

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