Regulating Multiple Polluters: Deterrence and Liability Allocation

Posted: 7 Mar 2000

See all articles by Charles E. Hyde

Charles E. Hyde

Independent

Gordon C. Rausser

University of California, Berkeley - Department of Agricultural and Resource Economics

Leo K. Simon

U.C. Berkeley, Dept of Agricultural and Resource Economics

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Abstract

We consider the problem of regulating many polluting firms when their individual emissions are unobservable. The tension between the dual regulatory goals of pollution deterrence and funding of remediation is examined under two different constraints: that penalty revenues be sufficient to fund remediation costs; and that transfers from firms to the regulator must be nonnegative. To isolate the pure effect of increasing the number of polluting firms, we compare an industry consisting of a single large firm with another in which many small firms in aggregate mimic the characteristics of the large firm. Contrary to previous findings, we show that both the number of firms and the ability to monitor individual firms significantly affect the welfare of a wide class of types of regulator.

JEL Classification: D21, D82, L51, Q20

Suggested Citation

Hyde, Charles E. and Rausser, Gordon C. and Simon, Leo K., Regulating Multiple Polluters: Deterrence and Liability Allocation. International Economic Review. Available at SSRN: https://ssrn.com/abstract=212788

Charles E. Hyde

Independent

No Address Available
United States

Gordon C. Rausser (Contact Author)

University of California, Berkeley - Department of Agricultural and Resource Economics ( email )

207 Giannini Hall no. 3310
Berkeley, CA 94720
United States
510-642-6591 (Phone)
510-643-0287 (Fax)

HOME PAGE: http://are.berkeley.edu/~rausser/

Leo K. Simon

U.C. Berkeley, Dept of Agricultural and Resource Economics ( email )

207 Giannini Hall
Berkeley, CA 94720
United States
510-642-8430 (Phone)
510-643-8911 (Fax)

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