IDEAS home Printed from https://ideas.repec.org/a/ags/jlaare/30768.html
   My bibliography  Save this article

Transaction Costs And Agricultural Nonpoint-Source Water Pollution Control Policies

Author

Listed:
  • Smith, Rodney B.W.
  • Tomasi, Theodore D.

Abstract

Mechanism design theory is used to develop the properties of optimal pollution control incentive schemes in the presence of adverse selection, moral hazard, and transaction costs. The model presented here shows (a) with no deadweight costs (transaction costs) , first-best allocations are always possible; (b) in the presence of transaction costs (caused by raising taxes), only second-best allocations are feasible; and (c) the conditions under which the optimal incentive scheme implementing second-best allocations will be a nonlinear tax, a standard(s), or a combination of both taxes and standard(s).

Suggested Citation

  • Smith, Rodney B.W. & Tomasi, Theodore D., 1995. "Transaction Costs And Agricultural Nonpoint-Source Water Pollution Control Policies," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 20(2), pages 1-14, December.
    • Handle: RePEc:ags:jlaare:30768
    DOI: 10.22004/ag.econ.30768
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/30768/files/20020277.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.30768?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Myerson, Roger B, 1979. "Incentive Compatibility and the Bargaining Problem," Econometrica, Econometric Society, vol. 47(1), pages 61-73, January.
    2. Guesnerie, Roger & Laffont, Jean-Jacques, 1984. "A complete solution to a class of principal-agent problems with an application to the control of a self-managed firm," Journal of Public Economics, Elsevier, vol. 25(3), pages 329-369, December.
    3. Lee, Dwight R. & Misiolek, Walter S., 1986. "Substituting pollution taxation for general taxation: Some implications for efficiency in pollutions taxation," Journal of Environmental Economics and Management, Elsevier, vol. 13(4), pages 338-347, December.
    4. Partha Dasgupta & Peter Hammond & Eric Maskin, 1979. "The Implementation of Social Choice Rules: Some General Results on Incentive Compatibility," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 46(2), pages 185-216.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kampas, Athanasios, 2001. "Identifying Common Fallacies in the Choice of Environmental Taxes for Agricultural Pollution Control: The Absence of Transaction Costs and the Normality of Agricultural Pollutants," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 2(2), pages 1-15, August.
    2. Lars Hansen, 2002. "Regulation of Non-Point Emissions – A Variance Based Mechanism," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 21(4), pages 303-316, April.
    3. Simanti Banerjee & Frans P. de Vries & Nick Hanley & Daan P. van Soest, 2014. "The Impact of Information Provision on Agglomeration Bonus Performance: An Experimental Study on Local Networks," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 96(4), pages 1009-1029.
    4. Carmen Arguedas & Daan Soest, 2011. "Optimal Conservation Programs, Asymmetric Information and the Role of Fixed Costs," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 50(2), pages 305-323, October.
    5. Collins, Alan R. & Maille, Peter, 2008. "Farmers as Producers of Clean Water: Getting Incentive Payments Right and Encouraging Farmer Participation," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6342, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    6. Lichtenberg, Erik, 2002. "Agriculture and the environment," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 2, chapter 23, pages 1249-1313, Elsevier.
    7. Yiridoe, Emmanuel K. & Weersink, Alfons, 1997. "A review and evaluation of agroecosystem health analysis: The role of economics," Agricultural Systems, Elsevier, vol. 55(4), pages 601-626, December.
    8. Lars Hansen, 1999. "A deposit-refund system applied to non-point nitrogen emissions from agriculture," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 2(4), pages 231-247, December.
    9. Alfons Weersink & John R. Livernois & Jason F. Shogren & James S. Shortle, 1998. "Economic Instruments and Environmental Policy in Agriculture," Canadian Public Policy, University of Toronto Press, vol. 24(3), pages 309-327, September.
    10. Kaplan, Jonathan D. & Howitt, Richard E. & Farzin, Y. Hossein, 2003. "An information-theoretical analysis of budget-constrained nonpoint source pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 46(1), pages 106-130, July.
    11. Herath, Deepananda P.B. & Weersink, Alfons, 1999. "Transaction Costs, Economic Instruments And Environmental Policies," 1999 Annual meeting, August 8-11, Nashville, TN 21588, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    12. McCann, Laura M.J. & Easter, K. William, 1998. "Estimating Transaction Costs Of Alternative Policies To Reduce Phosphorous Pollution In The Minnesota River," Staff Papers 13919, University of Minnesota, Department of Applied Economics.
    13. Bystrom, Olof & Bromley, Daniel W., 1998. "Contracting For Nonpoint-Source Pollution Abatement," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 23(1), pages 1-19, July.
    14. P. Bontems & N. Turpin & Gilles Rotillon, 2003. "Acceptibility constraints and self-selecting agri-environmental policies," THEMA Working Papers 2003-14, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    15. Nurmakhanova, Mira, 2008. "Essays on fall fertilizer application," ISU General Staff Papers 2008010108000016739, Iowa State University, Department of Economics.
    16. Philippe Bontems & Gilles Rotillon & Nadine Turpin, 2008. "Acceptable reforms of agri-environmental policies," Revue d'économie politique, Dalloz, vol. 118(6), pages 847-883.
    17. Brennan, Donna C., 1999. "Pollution Control Policies For Australian Prawn Farms," 1999 Conference (43th), January 20-22, 1999, Christchurch, New Zealand 123774, Australian Agricultural and Resource Economics Society.
    18. Athanasios Kampas & Ben White, 2004. "Administrative Costs and Instrument Choice for Stochastic Non-point Source Pollutants," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 27(2), pages 109-133, February.
    19. Philippe Bontems & Gilles Rotillon & Nadine Turpin, 2005. "Self-Selecting Agri-environmental Policieswith an Application to the Don Watershed," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 31(3), pages 275-301, July.
    20. Baerenklau, Kenneth A., 2002. "Green Payment Programs For Nonpoint Source Pollution Control: How Important Is Targeting For Cost-Effectiveness?," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 27(2), pages 1-14, December.
    21. Hansen, Lars Gårn, 1999. "A Deposit-Refund System Applied to Nitrogen Emissions from Agriculture," MPRA Paper 26664, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Iñaki Aguirre & Arantza Beitia, 2004. "Regulating a Monopolist with Unknown Demand: Costly Public Funds and the Value of Private Information," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 6(5), pages 693-706, December.
    2. Saglam, Ismail, 2016. "On the Pareto Efficiency of a Socially Optimal Mechanism for Monopoly Regulation," MPRA Paper 71090, University Library of Munich, Germany.
    3. Feng, Hongli, 2007. "Green payments and dual policy goals," Journal of Environmental Economics and Management, Elsevier, vol. 54(3), pages 323-335, November.
    4. B. Caillaud & R. Guesnerie & P. Rey & J. Tirole, 1988. "Government Intervention in Production and Incentives Theory: A Review of Recent Contributions," RAND Journal of Economics, The RAND Corporation, vol. 19(1), pages 1-26, Spring.
    5. Aguirre, Iñaki & Beitia, Arantza, 2017. "Modelling countervailing incentives in adverse selection models: A synthesis," Economic Modelling, Elsevier, vol. 62(C), pages 82-89.
    6. Ismail Saglam, 2017. "Monopoly Regulation Under Relaxed Pareto Efficiency," Studies in Microeconomics, , vol. 5(2), pages 162-176, December.
    7. Ismail Saglam, 2024. "The Bayesian approach to monopoly regulation after 40 years," Journal of Regulatory Economics, Springer, vol. 65(1), pages 108-136, June.
    8. Arve, Malin & Zwart, Gijsbert, 2023. "Optimal procurement and investment in new technologies under uncertainty," Journal of Economic Dynamics and Control, Elsevier, vol. 147(C).
    9. Moon Soo Kim & Jee Yong Chung, 2018. "Sustainable Growth and Token Economy Design: The Case of Steemit," Sustainability, MDPI, vol. 11(1), pages 1-12, December.
    10. Meirowitz, Adam, 2005. "Deliberative Democracy or Market Democracy: Designing Institutions to Aggregate Preferences and Information," Papers 03-28-2005, Princeton University, Research Program in Political Economy.
    11. Helmut Bester, 2009. "Externalities, communication and the allocation of decision rights," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 41(2), pages 269-296, November.
    12. Jacquillat, Alexandre & Vaze, Vikrant & Wang, Weilong, 2022. "Primary versus secondary infrastructure capacity allocation mechanisms," European Journal of Operational Research, Elsevier, vol. 303(2), pages 668-687.
    13. Bergemann, Dirk & Pavan, Alessandro, 2015. "Introduction to Symposium on Dynamic Contracts and Mechanism Design," Journal of Economic Theory, Elsevier, vol. 159(PB), pages 679-701.
    14. Acemoglu, Daron & Golosov, Mikhail & Tsyvinski, Aleh, 2008. "Markets versus governments," Journal of Monetary Economics, Elsevier, vol. 55(1), pages 159-189, January.
    15. Carmen Arguedas & Daan Soest, 2011. "Optimal Conservation Programs, Asymmetric Information and the Role of Fixed Costs," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 50(2), pages 305-323, October.
    16. Obara Ichiro, 2008. "The Full Surplus Extraction Theorem with Hidden Actions," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 8(1), pages 1-28, March.
    17. Lewis A. Kornhauser & W. Bentley MacLeod, 2012. "Contracts between Legal Persons [The Handbook of Organizational Economics]," Introductory Chapters,, Princeton University Press.
    18. Ismail Saglam, 2015. "Regulating a Manager-Controlled Monopoly with Unknown Costs," IPEK Working Papers 1503, Ipek University, Department of Economics.
    19. Sumit K. Majumdar, 2010. "Incentive Compatible Mechanism Design And Firm Growth: Experiences From Telecommunications Sector Regulation," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 81(3), pages 357-387, September.
    20. Wu, JunJie & Babcock, Bruce A., 1995. "Optimal Design Of A Voluntary Green Payment Program Under Asymmetric Information," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 20(2), pages 1-12, December.

    More about this item

    Keywords

    Environmental Economics and Policy;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:jlaare:30768. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/waeaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.