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| Author: | Chambers, R. Quiggin, J. |
| Title: | Non-point-source pollution regulation as a multi-task principal agent problem |
| Journal: | Journal of Public Economics
1996 : JAN, VOL. 59:1, p. 95-116 |
| Index terms: | POLLUTION AGENCY THEORY REGULATIONS |
| Language: | eng |
| Abstract: | This paper considers a multi-task, principal-agent problem where risk-averse farmers possessing private information have two tasks, pollution control and corn production, but only direct incentive for corn production. Using a highly tractable reformulation of the standard uncertain production model, a general method for solving the associated constrained Paretian problem is developed and analyzed. The optimal solution is shown to obey a generalized inverse-elasticity rule, and the optimal solution is characterized under a number of assumptions about the underlying technology and the role that pollution emission plays in reducing farmer risk. |
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