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Voluntary‐Threat Approaches to Reduce Ambient Water Pollution
Author(s) -
Suter Jordan F.,
Segerson Kathleen,
Vossler Christian A.,
Poe Gregory L.
Publication year - 2010
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1093/ajae/aaq042
Subject(s) - subgame perfect equilibrium , threatened species , nash equilibrium , turnover , environmental tax , economics , natural resource economics , pollution , public economics , environmental economics , microeconomics , tax reform , ecology , management , habitat , biology
This article considers the regulation of nonpoint source water pollution through the use of a voluntary‐threat approach, which allows a polluter group to meet a standard voluntarily but imposes an ambient tax upon noncompliance. In particular, we develop an “endogenous” voluntary‐threat approach that can be parameterized to induce compliance as a unique subgame perfect Nash equilibrium and eliminate zero‐abatement equilibria. Experimental evidence on the proposed approach as well as the “exogenous” approach of Segerson and Wu (2006) suggests that the severity of the threatened tax and the opportunity for communication are critical in determining policy outcomes.