Negotiation between Authority and Polluters Model for Support of Decision-Making in Environmental Policy: Principles and Experimental Case Test

The paper describes a relatively new approach to pollution reduction problem solving that relies on negotiation between polluters and authorities in which traditional economic tools of environmental policies are used and where there is the economic information asymmetry between the polluters and the authority. The approach can result in negotiated voluntary environmental agreements between authorities and polluters. Design and results of a laboratory environmental policy experiment on air pollution reduction in a city are presented in the paper to illustrate the efficacy of the suggested approach. The case is created based on field data. A step toward a verification of the hypothesis of a possibility to establish the suggested approach as a new institution for environmental pollution management in practice is the most important result. The case also shows the usefulness of laboratory environmental policy experiments both for research and teaching. Some problems of practical applications of this kind of environmental policy tool mix are also discussed in the paper.