A note on relative violation arguments in expected penalty functions for permit noncompliance

Aaron Hatcher

Applied Economics Letters, 2009, vol. 16, issue 4, 421-423

Abstract: Models of firm noncompliance under imperfectly enforced standards and permit regimes normally include a level violation argument in the firm's expected penalty function, analogous to the constraint term in a Lagrangian function. This article suggests that a relative violation argument may be more appropriate in many cases and demonstrates how this can change our predictions about firm behaviour under permit regimes.

Date: 2009
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DOI: 10.1080/13504850601018627

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