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Information Acquisition and Disclosure of Environmental Risk

Author

Listed:
  • Sengupta Aditi

    (Department of Economics, Auburn University, 0341 Haley Center, Auburn, AL, USA)

Abstract

Firms often invest resources in acquiring scientific evidence to evaluate the actual (more accurate) risk (i.e., the probability of occurrence) of any potential environmental hazards that might result from their own production processes and use this information in taking optimal preventive measures. In a symmetric duopoly where the acquired information about environmental risk is observed privately by the firms, I show that requiring firms to publicly report this information increases the strategic incentive of firms to invest in information acquisition. However, the net expected environmental damage of an investing firm is lower if there is no public disclosure.

Suggested Citation

  • Sengupta Aditi, 2017. "Information Acquisition and Disclosure of Environmental Risk," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 17(2), pages 1-9, April.
    • Handle: RePEc:bpj:bejeap:v:17:y:2017:i:2:p:9:n:8
    DOI: 10.1515/bejeap-2017-0043
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    References listed on IDEAS

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    1. Konar, Shameek & Cohen, Mark A., 1997. "Information As Regulation: The Effect of Community Right to Know Laws on Toxic Emissions," Journal of Environmental Economics and Management, Elsevier, vol. 32(1), pages 109-124, January.
    2. Khanna, Madhu & Quimio, Wilma Rose H. & Bojilova, Dora, 1998. "Toxics Release Information: A Policy Tool for Environmental Protection," Journal of Environmental Economics and Management, Elsevier, vol. 36(3), pages 243-266, November.
    3. Antelo, Manel & Loureiro, Maria L., 2009. "Asymmetric information, signaling and environmental taxes in oligopoly," Ecological Economics, Elsevier, vol. 68(5), pages 1430-1440, March.
    4. Kim, Eun-Hee & Lyon, Thomas P., 2011. "Strategic environmental disclosure: Evidence from the DOE's voluntary greenhouse gas registry," Journal of Environmental Economics and Management, Elsevier, vol. 61(3), pages 311-326, May.
    5. Sengupta, Aditi, 2015. "Competitive investment in clean technology and uninformed green consumers," Journal of Environmental Economics and Management, Elsevier, vol. 71(C), pages 125-141.
    6. Linda Bui, 2005. "Public Disclosure of Private Information as a Tool for Regulating Environmental Emissions: Firm-Level Responses by Petroleum Refineries to the Toxics Release Inventory," Working Papers 05-13, Center for Economic Studies, U.S. Census Bureau.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Cournot Duopoly; environmental risk; mandatory disclosure laws; strategic investment;
    All these keywords.

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

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