Information Acquisition and Disclosure of Environmental Risk

Aditi Sengupta

The B.E. Journal of Economic Analysis & Policy, 2017, vol. 17, issue 2, 9

Abstract: Firms often invest resources in acquiring scientific evidence to evaluate the actual (more accurate) risk (i.e., the probability of occurrence) of any potential environmental hazards that might result from their own production processes and use this information in taking optimal preventive measures. In a symmetric duopoly where the acquired information about environmental risk is observed privately by the firms, I show that requiring firms to publicly report this information increases the strategic incentive of firms to invest in information acquisition. However, the net expected environmental damage of an investing firm is lower if there is no public disclosure.

Keywords: Cournot Duopoly; environmental risk; mandatory disclosure laws; strategic investment (search for similar items in EconPapers)
JEL-codes: D42 D43 D82 L51 Q55 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1515/bejeap-2017-0043

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