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Tradeable-permit pollution control systems with and without commitment to auditing

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  • Hsiao-Chi Chen

    (National Taipei University)

  • Shi-Miin Liu

    (National Taipei University)

Abstract

This article analyzes and compares behaviors of a regulator and polluting firms in tradeable permit systems with and without commitment to auditing. If all firms are compliant, the equilibria under both of the schemes are the same. In contrast, if noncompliant firms exist, the equilibria under the two systems differ. The optimal permit number could affect the equilibrium auditing probability in the no-commitment case, while this impact would not appear in the commitment case. Moreover, the regulator will audit more under no commitment to auditing. The system with no commitment to auditing is less efficient than that with commitment to auditing.

Suggested Citation

  • Hsiao-Chi Chen & Shi-Miin Liu, 2005. "Tradeable-permit pollution control systems with and without commitment to auditing," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 7(1), pages 15-37, March.
    • Handle: RePEc:spr:envpol:v:7:y:2005:i:1:d:10.1007_bf03353943
    DOI: 10.1007/BF03353943
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    References listed on IDEAS

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