Incentive-compatible pollution control policies under asymmetric information on both risk preferences and technology

Jeffrey M. Peterson, Richard N. Boisvert

Research output: Contribution to journalArticle

9 Citations (Scopus)

Abstract

This article proposes a method to accommodate asymmetric information on farmers' risk preferences in designing voluntary environmental policies. By incorporating stochastic efficiency rules in a mechanism design problem, the government can find incentive-compatible policies by knowing only the general class of risk preferences among farmers. The model also accounts for hidden information on technology types and input use. The method is applied empirically to simulate a pollution control program in New York. Results suggest that participation incentives would be inadequate for many risk-averse producers if the government does not account for the diversity in risk preferences.

Original languageEnglish (US)
Pages (from-to)291-306
Number of pages16
JournalAmerican Journal of Agricultural Economics
Volume86
Issue number2
DOIs
StatePublished - May 1 2004

Fingerprint

pollution control
Motivation
Technology
Environmental Policy
farmers
environmental policy
Risk preferences
Incentive compatible
Asymmetric information
Pollution control
methodology
Farmers
Government

Keywords

  • Asymmetric information
  • Mechanism design
  • Nonpoint pollution
  • Risk preferences

Cite this

Incentive-compatible pollution control policies under asymmetric information on both risk preferences and technology. / Peterson, Jeffrey M.; Boisvert, Richard N.

In: American Journal of Agricultural Economics, Vol. 86, No. 2, 01.05.2004, p. 291-306.

Research output: Contribution to journalArticle

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