Premium
REGULATION OF POLLUTION IN THE LABORATORY: RANDOM INSPECTIONS, AMBIENT INSPECTIONS, AND COMMITMENT PROBLEMS
Author(s) -
Cochard François,
Le Gallo Julie,
Franckx Laurent
Publication year - 2015
Publication title -
bulletin of economic research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.227
H-Index - 29
eISSN - 1467-8586
pISSN - 0307-3378
DOI - 10.1111/boer.12035
Subject(s) - agency (philosophy) , incentive , power (physics) , business , pollution , environmental economics , economics , microeconomics , ecology , philosophy , physics , epistemology , quantum mechanics , biology
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.