Collective penalities and inducement of self-reporting

Katrin Millock and David Zilberman

Cahiers de la Maison des Sciences Economiques from Université Panthéon-Sorbonne (Paris 1)

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: Ambient tax; collective penalties; enforcement; self-reporting (search for similar items in EconPapers)
JEL-codes: H23 K42 Q28 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2006-05
New Economics Papers: this item is included in nep-cdm and nep-pbe
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https://halshs.archives-ouvertes.fr/halshs-00118778 (application/pdf)

Related works:
Working Paper: Collective penalties and inducement of self-reporting (2006)
Working Paper: Collective penalties and inducement of self-reporting (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:mse:wpsorb:v06048

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