Voluntary-Threat Approaches to Reduce Ambient Water Pollution

Jordan Suter, Kathleen Segerson (), Christian Vossler and Gregory Poe

American Journal of Agricultural Economics, 2010, vol. 92, issue 4, 1195-1213

Abstract: This article considers the regulation of nonpoint source water pollution through the use of a voluntary-threat approach, which allows a polluter group to meet a standard voluntarily but imposes an ambient tax upon noncompliance. In particular, we develop an "endogenous" voluntary-threat approach that can be parameterized to induce compliance as a unique subgame perfect Nash equilibrium and eliminate zero-abatement equilibria. Experimental evidence on the proposed approach as well as the "exogenous" approach of Segerson and Wu (2006) suggests that the severity of the threatened tax and the opportunity for communication are critical in determining policy outcomes. Copyright 2010, Oxford University Press.

Date: 2010
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