Regulation of Pollution in the Laboratory: Random Inspections, Ambient Inspections, and Commitment Problems

34 Pages Posted: 7 Jan 2016

See all articles by François Cochard

François Cochard

Université Louis Pasteur Strasbourg I

Julie Le Gallo

CRESE

Laurent Franckx

Transport & Mobility Leuven

Date Written: December 2015

Abstract

We compare experimentally a traditional random inspection policy and a variant where the agency may carry out a preliminary inspection of the level of ambient pollution before implementing any individual inspection. Since the agency may have an incentive to announce high inspection probabilities and then secretly renege on its announcement to avoid implementing costly inspections, we are also interested in the agency's commitment power. We find that overall, ambient inspections increase efficiency but the effect is weaker than expected when the agency has no commitment power; and polluters' reactions to the lack of commitment power of the agency vary depending on whether the agency uses ambient inspections or not.

Keywords: commitment problems, experiments, nonpoint source pollution, random inspections, regulation of pollution

JEL Classification: C92, H23, Q53, Q58

Suggested Citation

Cochard, François and Le Gallo, Julie and Franckx, Laurent, Regulation of Pollution in the Laboratory: Random Inspections, Ambient Inspections, and Commitment Problems (December 2015). Bulletin of Economic Research, Vol. 67, Issue S1, pp. S40-S73, 2015, Available at SSRN: https://ssrn.com/abstract=2712017 or http://dx.doi.org/10.1111/boer.12035

François Cochard (Contact Author)

Université Louis Pasteur Strasbourg I

61, avenue de la foret noire
4, rue Blaise Pascal
Strasbourg, Alsace 3000
France

Julie Le Gallo

CRESE ( email )

1 rue Claude Goudimel
25030 Besancon cedex, DOUBS 25000
France

Laurent Franckx

Transport & Mobility Leuven ( email )

Vital Decosterstraat 67A bus 0001
Leuven, 3000
Belgium

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