Cleanup delays at hazardous waste sites: an incomplete information game

Gordon Rausser, Leo Simon and Jinhua Zhao

Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series from Department of Agricultural & Resource Economics, UC Berkeley

Abstract: This paper studies the incentives facing Potentially Responsible Parties at a hazardous waste site to promote excessive investigation of the site and thus postpone the beginning of the remediation phase of the cleanup. We model the problem as an incomplete information, simultaneous-move game between PRPs. We assume that PRP's liability shares are predetermined. Each PRP's type is its private information about the precision of its own records relating to the site. A strategy for a PRP is a function mapping its type into announced levels of precision. Once types have been realized, the regulator aggregates the realized precision announcements and imposes the investigation schedule according to a predetermined policy function. We show that a pure-strategy Nash equilibrium exists, in which each PRP's strategy is monotone increasing in its type. We prove that PRPs with higher liability shares have greater incentives to delay than those with lower shares. We also show that under certain conditions, when liability shares become more homogeneous, delay becomes more likely. We demonstrate that when certain conditions are imposed on our model, it predicts that two widespread practices--de minimis buyouts and the formation of steering committees--will tend to increase delay.

Keywords: environmental economics; game theory; hazardous waste; Social and Behavioral Sciences (search for similar items in EconPapers)
Date: 1999-04-01
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