search query: @freeterm enforcement / total: 6
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| Author: | Stranlund, J. K. |
| Title: | Risk aversion and compliance in markets for pollution control |
| Journal: | Journal of Environmental Management
2008 : JUL, VOL. 88:2, p. 203-210 |
| Index terms: | markets risk analysis risk management pollution control models |
| Freeterms: | emissions trading compliance enforcement risk aversion |
| Language: | eng |
| Abstract: | This article examines the effects of risk aversion on compliance choices in markets for pollution control. The author argues that: 1) a firm's decision to be compliant or not is independent of its manager's risk preference. non-compliant firms with risk-averse managers will have lower violations than otherwise identical firms with risk-neutral managers. 2) the violations of non-compliant firms with risk-averse managers are independent of differences in their profit functions and their initial allocations of permits if and only if their managersÂ’ utility functions exhibit constant absolute risk aversion. firm-level characteristics do impact violation choices when managers have coefficients of absolute risk aversion that are increasing or decreasing in profit levels. 3) in the equilibrium of a market for emissions rights with widespread non-compliance, risk aversion is associated with higher permit prices, better environmental quality, and lower aggregate violations. |
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