Author

Caffera, Marcelo ; Dubra, Juan

Editor

Universidad de Montevideo, Facultad de Ciencias Empresariales y Economía, Departamento de Economía

Date

2006

Extensión

19 p.

Abstract

We study the problem of a regulator who must control the emissions of a given pollutant from a series of industries when the firms’ abatement costs are unknown. We develop a mechanism in which the regulator asks firms to report their abatement costs and implements the most stringent emissions standard consistent with the firms’ declarations. He also inspects one of the firms in each industry which declared the cost structure consistent with the least stringent emissions standard and with an arbitrarily small probability, he discovers whether the report was true or not. The firm is punished with an arbitrarily small fine if and only if its report was false. This mechanism is simple, is implementable in practice, its unique equilibrium is truth telling by firms, it implements the first best pollution standards and shares some features of the regulatory processes actually observed in reality.

Palabras claves

Efficient emissions standards Command and control Truth telling Full nash implementation

Tipo

Documento de trabajo

Derechos

Abierto

Versión

Publicada

En

Documentos de trabajo del Departamento de Economía

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