FEEM working papers "Note di lavoro" series
2002 .088

Environmental enforcement with endogenous ambient monitoring


Authors: Laurent Franckx
Series: Climate Change and Sustainable Development
Editor: Carlo Carraro
Type: Journal
Keywords: environmental enforcement,ambient inspections,commitment
JEL n.: K42,Q20
JEL: Environmental and Resource Economics
Pages: vol. 30, no. 2, pp. 185-220(26)
Date: 2005

Abstract

We consider an inspection game between $n$ polluting firms and an environmental enforcement agency. If the cost of monitoring ambient pollution is low enough, the optimal inspection policy consists in imposing the maximal possible fine, and mixing between observing ambient pollution and not conducting any inspection at all. However, with stringent upper limits on the fine, the agency mixes between observing ambient pollution and inspecting all firms. The observation of ambient pollution is always followed by sequentially rational firm inspections. Comparisons with Franckx (2002a,2002b) show that commitment power has a very strong impact on the value of prior information.

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