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Voluntary Contributions with Uncertainty: The Environmental Quality

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  • Pierre-André Jouvet

    (GREQAM, Marseille; GREMARS, University of Lille III)

Abstract

This article presents a model in which production causes pollution that diminishes the welfare of its agents. Each agent is concerned with the quality of its environment and may voluntary contribute to improve it by financing depollution technology. The effectiveness of this technology on the quality of the environment is uncertain. We show that if an agent is sufficiently risk averse, voluntary contribution is a decreasing function of the average efficiency of depollution technology. If, on the contrary, the pollution effect is weaker than the substitution effect, the opposite holds. We show that precaution about environmental quality has two possible consequences that depend on agents' risk aversion. Therefore, the implications of a precautionary attitude lead us to consider the agents' risk-aversion characterization, which implies knowledge about prudent attitude. The Geneva Papers on Risk and Insurance Theory (1998) 23, 151–165. doi:10.1023/A:1008678228249

Suggested Citation

  • Pierre-André Jouvet, 1998. "Voluntary Contributions with Uncertainty: The Environmental Quality," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 23(2), pages 151-165, December.
    • Handle: RePEc:pal:genrir:v:23:y:1998:i:2:p:151-165
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    Cited by:

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    3. Johanna Etner & Meglena Jeleva & Pierre‐Andre Jouvet, 2009. "Pessimism Or Optimism: A Justification To Voluntary Contributions Toward Environmental Quality," Australian Economic Papers, Wiley Blackwell, vol. 48(4), pages 308-319, December.

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    More about this item

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • Q29 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Other

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