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Envelope Backs or the Gold Standard? Choosing the Accuracy of Damage Assessment Methods

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  • Amy Whritenour Ando
  • Wallapak Polasub

Abstract

Government trustees conduct natural resource damage assessments (NRDAs) to hold firms liable for damages caused by their pollution. We analyze a model in which a trustee chooses NRDA accuracy and a firm chooses precaution in response, where increased NRDA accuracy increases expense but decreases the chance that the firm evades damage payment. We find that optimal NRDA accuracy increases with the expected value of the damages. Other results help trustees design welfare-improving regimes to reduce damages from small spills, and identify policy changes and research that can increase social welfare in the NRD arena.

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  • Amy Whritenour Ando & Wallapak Polasub, 2006. "Envelope Backs or the Gold Standard? Choosing the Accuracy of Damage Assessment Methods," Land Economics, University of Wisconsin Press, vol. 82(3), pages 424-444.
    • Handle: RePEc:uwp:landec:v:82:y:2006:i:3:p:424-444
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    References listed on IDEAS

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    Cited by:

    1. Amy Ando & Wallapak Polasub, 2009. "The political economy of state-level adoption of natural resource damage programs," Journal of Regulatory Economics, Springer, vol. 35(3), pages 312-330, June.
    2. Amy W. Ando & Madhu Khanna, 2004. "Natural Resource Damage Assessment Methods: Lessons in Simplicity from State Trustees," Contemporary Economic Policy, Western Economic Association International, vol. 22(4), pages 504-519, October.

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    JEL classification:

    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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