A model of principal-agency control of wastes under technological progress

Hans Gottinger

Environmental & Resource Economics, 1996, vol. 7, issue 3, 263-286

Abstract: We analyze performance and outcome of principal-agency relationships in an environment with pollution externalities and technological progress. We assume that firms may not purposely violate the pollution control regulations but nonetheless generate some pollution due to negligence. The models allow firms two possible actions: either to increase the level of treated waste legally or pay an expected penalty if illegal pollution is detected. We show that in a world with pollution externalities, technological progress does not guarantee increases in the welfare level. Most important for policy purposes, the analysis shows the trade-offs between the policy instruments: penalties, taxes/subsidies and treatment costs in a world where technological progress occurs and firms may violate the law. Copyright Kluwer Academic Publishers 1996

Keywords: Principal agent; waste management; regulation; welfare (search for similar items in EconPapers)
Date: 1996
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DOI: 10.1007/BF00782149

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