Information Disclosure as Environmental Regulation: A Theoretical Analysis

Mark A. Cohen () and V. Santhakumar

Environmental & Resource Economics, 2007, vol. 37, issue 3, pages 599-620

Abstract: Governments around the world are beginning to embrace a new form of environmental regulation – mandatory disclosure of information. While information disclosure programs appear to have an impact on subsequent firm behavior – often resulting in lower levels of pollution – little is known about the costs and benefits of these programs and whether or not they enhance social welfare. This paper presents a simple bargaining model where mandatory information disclosure is used to overcome a lack of information on the part of the public. We characterize the conditions under which information disclosure will lead to a reduction in emissions, and ultimately, the conditions under which it will enhance social welfare. Several extensions of the model are briefly explored, including the effect of two sources of pollution – only one of which is subject to information disclosure. Copyright Springer Science+Business Media, Inc. 2007

Keywords: information disclosure; environmental regulation; Coase theorem; asymmetric information; D62; H41; Q58 (search for similar items in EconPapers)
Date: 2007
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Persistent link: http://EconPapers.repec.org/RePEc:kap:enreec:v:37:y:2007:i:3:p:599-620

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