Collective penalties and inducement of self-reporting

Katrin Millock () and David Zilberman
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Katrin Millock: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique

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Abstract: Random accidents can be contained by collective penalties. These penalties are not likely to be enforced but rather induce self-reporting that enhances welfare due to early containment. Self-reporting under collective penalties increases overall welfare, but may increase expected environmental cost. Even when regulation is constrained by an upper limit on the acceptable collective penalty, the threat of collective penalties can induce an incentive-compatible mutual insurance scheme under which a side-payment is made to the agent that self-reports an accident. This self-reporting mechanism is welfare-improving, but first-best outcomes can only be obtained when the collective penalty is unconstrained, or when an honor system applies. In cases when there is a new externality that requires fast response (avian flu), collective penalties can compliment or substitute for monitoring.

Keywords: enforcement; collective penalties; Ambient tax; self-reporting; déclaration; application; pénalités collectives; Taxe d'habitation (search for similar items in EconPapers)
Date: 2006-05
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00118778v1
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Citations: View citations in EconPapers (1)

Published in 2006

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Working Paper: Collective penalties and inducement of self-reporting (2006)
Working Paper: Collective penalities and inducement of self-reporting (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00118778

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