Self-Reporting and the Design of Policies for Regulating Stochastic Pollution

Optimal Law Enforcement with Self-Reporting of Behavior

“…We comment on this literature in n. 25. In the literature on law enforcement, the only article analyzing self-reporting is Malik (1993), which was written independently of our original working paper (Kaplow and Shavell 1991). See also Kaplow (1992), which incorporates self-reporting when analyzing other issues.…”

Watershed Nutrient Trading Under Asymmetric Information

“…Finally, Stranlund and Dhanda (1999) explicitly consider noncompliance in dynamic trading policies under asymmetric information. They establish, in such a case, that optimal monitoring and enforcement need not be differentiated across heterogeneous firms as advocated earlier by Malik (1993) and Garvie and Keeler (1994). 1 These theoretical models illustrate how noncompliance and costly monitoring and enforcement can erode the efficiency of market-based policies to control pollution.…”

“…The performance and appropriateness of these policies for NPS pollution, however, continue to be challenged for a number of reasons-e.g., noncompliance (Malik, 1990), market power (Van Egteren and Weber, 1996), transactions costs (Stavins, 1995), uncertainty (Taff and Senjem, 1996), and trading ratios (Hoag and Hughes-Popp, 1997).…”

“…These theoretic policy models have generally fallen into two categories: (a) those that base monitoring and enforcement on observations of ambient environmental quality (e.g., Segerson, 1988;Xepapadeas, 1991;Horan, Shortle, and Abler, 1998), and (b) those that focus monitoring and enforcement on individual firms (e.g., Malik, 1993;Garvie and Keeler, 1994;Stranlund and Dhanda, 1999).…”

“…While much of this literature has addressed nonstochastic, point source (PS) pollution, three recent studies are more applicable to agricultural, NPS trading programs. Malik (1993) examines incentivecompatible auditing and enforcement by the regulator when firms must self-report abatement compliance. Garvie and Keeler (1994) extend this analysis to heterogeneous firms which strategically interact with the regulator.…”