Abstract
Governments around the world are beginning to embrace a new form of environmental regulation – mandatory disclosure of information. While information disclosure programs appear to have an impact on subsequent firm behavior – often resulting in lower levels of pollution – little is known about the costs and benefits of these programs and whether or not they enhance social welfare. This paper presents a simple bargaining model where mandatory information disclosure is used to overcome a lack of information on the part of the public. We characterize the conditions under which information disclosure will lead to a reduction in emissions, and ultimately, the conditions under which it will enhance social welfare. Several extensions of the model are briefly explored, including the effect of two sources of pollution – only one of which is subject to information disclosure.
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Acknowledgments
Santhakumar would like to acknowledge the support received from the overseas fellowship program of the India Environment Economics Capacity Building Project. Mark Cohen acknowledges the support of the Dean’s Fund for Summer Research, Owen Graduate School of Management, Vanderbilt University. The views expressed are those of the authors and are not necessarily those of the sponsors.
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This paper was prepared while V. Santhakumar was a Visiting Scholar at the Vanderbilt Center for Environmental Management Studies, Vanderbilt University.
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Cohen, M.A., Santhakumar, V. Information Disclosure as Environmental Regulation: A Theoretical Analysis. Environ Resource Econ 37, 599–620 (2007). https://doi.org/10.1007/s10640-006-9052-9
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DOI: https://doi.org/10.1007/s10640-006-9052-9