A Note on Pollution Regulation With Asymmetric Information

Alberto Pench
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Alberto Pench: Department of Political Sciences, University of Pisa

No 2016.20, Working Papers from Fondazione Eni Enrico Mattei

Abstract: The paper addresses the problem of information asymmetry between a regulator and the polluting firms and proposes a very simple mechanism where the regulator is free to choose, without communicating in advance to the firms, between two instruments: an effluent fee or a standard: as a result in a real world setting this uncertainty might induce firms to a truthful revelation. Moreover, under the assumption of linear marginal abatement or marginal social damage functions, in many cases the resulting optimal behaviour might be an under reporting for some firms and an over reporting for others so that the resulting marginal aggregate benefit function might be not so far from the true one and the aggregate pollution level attained by the mechanism not so far from optimal.

Keywords: Effluent Fee; Standards; Asymmetric Information; Truthful Revelation (search for similar items in EconPapers)
JEL-codes: H23 Q5 (search for similar items in EconPapers)
Date: 2016-03
New Economics Papers: this item is included in nep-env and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:fem:femwpa:2016.20

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