Optimal environmental standards under asymmetric information and imperfect enforcement

Carmen Arguedas ()

No 10, Discussion Paper from Tilburg University, Center for Economic Research

Abstract: We study optimal policies composed of pollution standards, probabilities of inspection and fines dependant on the degree of noncompliance with the standards, in a context where regulated firms own private information. In contrast with previous literature, we show that optimal policies, being either pooling or separating, can imply violations to strictly positive standards. This results crucially depends on the monitoring costs, the types of firms and the regulator's degree of uncertainty.

JEL-codes: D82 K32 K42 L51 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-env and nep-law
Date: 2005
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