UW-Madison UW-Madison

Staff Paper No. 392 - Abstract

Contracting for Non-Point-Source Pollution Abatement

Olof Bystrom [olof.bystrom@ekon.slu.se]
Daniel W. Bromley [dwbromley@wisc.edu]

Staff Paper No. 392, March 1996, 31p.


This paper presents an incentive scheme to control agricultural non-point-source pollution. The analysis is based on a nested agent framework with three parties; farmers, a country's government, and the governments of all countries that affect each other's environmental quality. Unlike previous analysis of incentive schemes to control agricultural pollution, we suggest non-individual contracts between farmers and a regulating authority as a solution to the domestic pollution problem. Our incentive scheme proposes collective penalties as a way to control pollution. To solve the international problem of pollution management of a common (water) resource, we propose an international agency with authority to write and enforce contracts in each of its member countries. We show that the information requirement on a country's government can be substantially reduced if contracts can be made non-individual.
Last updated on Thu, Jun 2, 2005 11:42am