Implementing second-best environmental policy under adverse selection

Research output: Contribution to journalArticle

10 Scopus citations

Abstract

A key obstacle to practical application of mechanism design theory to regulation is the difficulty of obtaining consistent beliefs regarding information that theoretical models assume to be commonly held. This article presents a solution to this problem by developing an easily implemented empirical methodology with which the government can use available data to develop beliefs regarding the technology and distribution of types in a regulated sector characterized by hidden information. Results are used to calibrate a second-best land conservation mechanism and evaluate its cost relative to simpler alternatives.

Original languageEnglish (US)
Pages (from-to)253-268
Number of pages16
JournalJournal of Environmental Economics and Management
Volume57
Issue number3
DOIs
StatePublished - May 1 2009
Externally publishedYes

Keywords

  • Adverse selection
  • Empirical contract theory
  • Environmental policy
  • Stochastic frontier analysis

ASJC Scopus subject areas

  • Economics and Econometrics
  • Management, Monitoring, Policy and Law

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