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On the design of incentive mechanisms in environmental policy

Author

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  • Klaus Conrad
  • Jianmin Wang

Abstract

The objective of this paper is to present environmental policy as a simple game in two stages within a principal-agent framework. At the outset the authority adopts a transfer payment rule. Then the firms react by carrying out abatement activities, based on their chosen levels of emission and output. Next the authority measures the emissions (and residual profit of the industry) and revises the level of its instrument. Then the game starts again. Our purpose is to narrow the scope of ad hoc incentive schemes by characterizing families of optimal linear schemes. Copyright Kluwer Academic Publishers 1993

Suggested Citation

  • Klaus Conrad & Jianmin Wang, 1993. "On the design of incentive mechanisms in environmental policy," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 3(3), pages 245-262, June.
    • Handle: RePEc:kap:enreec:v:3:y:1993:i:3:p:245-262
    DOI: 10.1007/BF00313161
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    References listed on IDEAS

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    4. Evan Kwerel, 1977. "To Tell the Truth: Imperfect Information and Optimal Pollution Control," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 44(3), pages 595-601.
    5. repec:cup:cbooks:9780521311120 is not listed on IDEAS
    6. Roberts, Marc J. & Spence, Michael, 1976. "Effluent charges and licenses under uncertainty," Journal of Public Economics, Elsevier, vol. 5(3-4), pages 193-208.
    7. repec:cup:cbooks:9780521322249 is not listed on IDEAS
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