Bernard Sinclair-Desgagné

On Precautionary Policies

In the United States and most industrialized countries, regulatory policies pertaining to food safety, occupational health, and environmental protection are (according to laws and statutes) science based. The complexity of some ecosystems and new technologies, however, makes it increasingly necessary to deal with situations where scientists cannot yet provide a definite picture. In this context, a widely invoked (but debated) rule, known as the Precautionary Principle, says to address potential hazards right away with preventive measures. We develop an intuitive formalization of this rule, which allows us to infer what an appropriate precautionary policy should do. Implications for resource conservation and the regulation of technological risks are then explored.

Ranking Contingent Monitoring Systems

This paper seeks to provide a ranking of information systems in a setting of contingent monitoring. Control strategies that make the acquisition of additional information conditional on observing certain outcomes largely elude the existing ranking criteria. We show that this happens because contingent monitoring involves more than the classical trade-off between risk sharing and incentives; it also requires a balancing of incentives and downside risk. We then develop a refinement of the most common information system orderings that conveys this feature. This allows us to reinterpret and generalize some of the literatures key results concerning, for instance, auditing policies with independent or with correlated signals and monitoring systems where the precision of an added signal is endogenous.

The Pigouvian Tax Rule in the Presence of an Eco-Industry

Pollution abatement goods and services are now largely being delivered by a specialized “eco-industry.” This note reconsiders Pigouvian taxes in this context. We find that the optimal emission tax will depart from the marginal social cost of pollution according to the polluters’ and the environment firms’ relative market power.

On the regulation of procurement bids

Abstract It is shown that a rational buyer should not put any restriction on the non-price components fo procurement bids, when both her utility and the sellers profit functions are linear in price, and her preferences are common knowledge.

Innovation under the threat of stricter environmental standards

Corrective policies for environmental externalities may take a number of forms. The ones most commonly analyzed in the literature are emission taxes, emission-abatement subsidies, direct regulation through technical standards and tradeable permits [see Baumol and Oates (1988)]. Little attention has been given so far to the threat of environmental regulation. In a recent paper, Glazer and McMillan (1992) argue, however, that “Regulation does not always appear as an unexpected event, and threatened firms may alter their behavior in order to reduce the probability of regulation.” For example, when German environment minister Klaus Topfer threatened to force automobile manufacturers to take back the 2 million cars that are scrapped in Germany each year, Germany’s automobile manufacturers, in particular Volkswagen, ran to establish efficient disassembly systems [Schmidheiny (1992)].1 This paper therefore examines the transition process towards new environmental standards and the innovation effort of a monopolist threatened by a change of environmental regulation.

Assessing Economic Inequality

Important contributions to the assessment of economic inequality have recently been made using concepts such as stochastic dominance, that are well known in Operational Research. We reformulate and extend this approach in a way that allows for identifying the range of welfare improving income redistributions in a given society.

Polluters and Abaters

To comply with laws, regulations and social demands, polluting firms increasingly purchase the needed means from specialized suppliers. This paper analyzes this relatively recent phenomenon. We show how environmental regulation, the size of the output market, the elasticity of demand for abatement goods and services, and the fact that in-house and outsourced abatement expenses are substitutes or complements can influence a polluter’s make-or-buy decision. Specific features of abatement outsourcing are highlighted, qualifications and refinements of the theory of vertical integration are then proposed, and some consequences for environmental policy are briefly discussed.

Group decision support systems implement Bayesian rationality

Abstract When saying that group decisions are good, one often means that they are ‘externally Bayesian’. Proposed by Madansky (1964), the externally Bayesian criterion requires that the decisions of the group look as if they were chosen by a Bayesian individual. A process due to DeGroot (1974) satisfies this criterion. We argue that this process corresponds to a group decision support system. This reinforces the claim that group decision support systems can improve group decision making.

Environmental Regulation and Horizontal Mergers in the Eco-Industry

This paper considers the environmental policy and welfare implications of a merger between environment firms (i.e., firms managing environmental resources or supplying pollution abatement goods and services). The traditional analysis of mergers in Cournot oligopolies is extended in two ways. First, we show how environmental policy affects the incentives of environment firms to merge. Second, we stress that mergers in the eco-industry impact welfare beyond what is observed in other sectors, due to an extra effect on pollution abatement efforts; this might lead to disagreements between an anti-trust agency seeking to limit market concentration which can be detrimental to consumer surplus and a benevolent regulator who maximizes total welfare.

Emission taxes when pollution depends on location

It is well known that an efficient pollution taxation scheme should charge each source according to its specific marginal contribution to social damages. Despite significant advances in environmental assessment, geographic information systems and data analysis, this requirement would impose technical, informational and administrative expenses that most regulators – notably in developing countries – seem unable to afford. This paper shows that it can actually be less demanding than it seems. If polluters are price-takers, for instance, in a context where the affected population concentrates at a given location, then the optimal emission tax will disregard a sources location. Otherwise, the adjustment of the optimal tax to location will depend on the extent of a polluters market power.