Non-point-source pollution regulation as a multi-task principal-agent problem

Article Abstract:

A general method for solving a multi-task, principal-agent problem is developed. The subjects used are risk-averse farmers who are preoccupied with pollution control and corn production, but have direct incentive only for corn production. It is shown that the solution obeys a generalized version of the 'inverse-elasticity' rule associated with public pricing theory. The optimal solution is characterized under a number of assumptions about the underlying technology and the role that pollution emission plays in reducing farmer risk.

Agriculture, Crop Production, Problem solving, Agricultural pollution

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A state-contingent production approach to principal-agent problems with an application to point-source pollution control

Article Abstract:

The moral-hazard problem was formulated using a state-space model that features a contingent representation of production in uncertain conditions. A closed-form solution for the agency-cost problem involving point-source pollution control was developed and comparative-static results were presented. It was found that the tools of optimal tax theory and production theory lead to a straightforward reformulation of the standard moral-hazard problem and that this moral-hazard problem shifts from hidden action to hidden information.

Econometrics & Model Building, Econometrics, Agency (Law), Production (Economics), Business models, Uncertainty

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Enforcement leverage when penalties are restricted: a reconsideration under asymmetric information

Article Abstract:

The concept proposed by Harrington (1998) regarding the correlation of high regulatory compliance and low penalty rates possess inconsistencies. In his work, firms are assumed to be identical with known compliance costs. Based on these assumptions, Harrington claims that the imposition of low penalty rates for regulatory offenses tends to result in high compliance levels. Such may not be true for all conditions, particularly when compliance costs are unknown and firms are dynamic.

Administration of Air and Water Resource and Solid Waste Management Programs, Environmental Programs, Evaluation, Law enforcement, Environmental policy, Microeconomics

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