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Discretionary enforcement and strategic interactions between firms, regulatory agency and justice department: a theoretical and empirical investigation

Anna Rita Germani (), Andrea Morone (), Piergiuseppe Morone () and Pasquale Scaramozzino

MPRA Paper from University Library of Munich, Germany

Abstract: This paper presents a game theoretic morphological analysis of the U.S. environmental authorities’ (i.e., EPA and DOJ) behavioural mechanisms, based on strategic interactions among the players. The models explore the role of discretion that such authorities enjoy, either in deciding how to pursue environmental violations (investigative and prosecutorial discretion) or in judging them (judicial discretion). The purpose is to identify both the optimal firms’ behaviour in terms of compliance, and the DOJ’s and EPA’s optimal strategies in terms of enforcement actions to undertake. Consistent with the setting of the game theory models, the role of EPA and DOJ in deterring firms from polluting is, then, empirically tested, by means of a laboratory experiment. Laboratory evidence on compliance behaviour of firms when faced with enforcement conditions predicted by the theoretical models set up is discussed for the different experimental treatments performed.

Keywords: environmental enforcement; discretion; game theory; experimental economics. (search for similar items in EconPapers)
JEL-codes: D8 D80 D81 K0 K32 K42 Q5 Q50 Q52 (search for similar items in EconPapers)
Date: 2013-09
New Economics Papers: this item is included in nep-exp and nep-law
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