Transboundary pollution, asymmetric information and social welfare

Slim Ben Youssef ()

Economics Bulletin, 2004, vol. 4, issue 9, pages 1-8

Abstract: We consider two regulator-firm hierarchies with transboundary pollution, and firms may have private information about their marginal cost of production. The pollution of each firm is proportional to its production. The impact of asymmetric information on social welfare can be explained by a positive effect, which is the reduction of transborder pollution; one negative effect is the socially costly informational rents captured by firms. We show that, when the damage function is as such, the non-internalization of the transfrontier pollution is sufficiently important, then non-cooperating countries can get a higher expected or ex ante social welfare under incomplete information.

Keywords: Expected social welfare; Incomplete information; Non-internalization; Transboundary pollution (search for similar items in EconPapers)
JEL-codes: D8 Q2 (search for similar items in EconPapers)
Date: 2004-05-24
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