Voluntary-Threat Approaches to Reduce Ambient Water Pollution
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چکیده
This article uses theory and experiments to investigate voluntary-threat approaches for regulating nonpoint source water pollution. The policies allow a group of polluters to voluntarily meet a pollution standard, under threat of a mandatory tax policy to be implemented in the case of noncompliance. Building upon recent work by Segerson and Wu (2006), who propose what we label an “exogenous” voluntary-threat approach, we develop an “endogenous” voluntary-threat approach wherein the severity of the threatened tax policy is increasing in the level of noncompliance in the voluntary stage. This endogenous mechanism offers theoretical advantages; in particular it can be parameterized so as to induce a unique subgame perfect Nash equilibrium and the elimination of equilibria in which firms engage in zero abatement. Experimental evidence suggests that the level of the threshold for the ambient tax and the opportunity for communication play critical roles in determining policy outcomes. JEL: H23, Q53, C92
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