Lana Friesen

Targeting enforcement to improve compliance with environmental regulations

By targeting enforcement efforts on specific segments of the regulated community, greater compliance with environmental regulations can be achieved. In this paper, the inspection minimizing targeting scheme with two groups is derived. Firms are moved at random into the target group, while escape from the target group occurs only when an inspection reveals the firm is in compliance. The optimal targeting scheme reduces inspection costs compared with the strategy suggested by Harrington (J. Public Econom. 37 (1988) 29), where firms are moved into the target group on the basis of compliance record. However, the range of parameter values for which the optimal solution is feasible is limited.

Overconfidence in Forecasts of Own Performance: An Experimental Study

Systematic overconfidence by individuals regarding their abilities and prospects could have important economic consequences. But overconfidence has received little direct testing within economics. We use experiments to test for overconfidence in peoples forecasts of their absolute or relative performance in two unfamiliar tasks. Given their chosen effort, participants have incentives to forecast accurately, with opportunities for feedback, learning and revision. Forecasts are evaluated at aggregate and individual levels. We find zero mean error or underconfidence far more prevalent than overconfidence. Underconfidence is greatest in forecasts of absolute rather than relative performance and among those using greater effort quantity or quality.

Certainty of Punishment versus Severity of Punishment- An Experimental Investigation

Compliance with laws and regulations depends on the expected penalty facing violators. The expected penalty depends on both the probability of punishment and the severity of the punishment if caught. A key question in the economics of crime literature is whether increasing the probability of punishment is a more effective deterrent than an equivalent increase in the severity of punishment. This paper uses laboratory experiments to investigate this issue, and finds that increasing the severity of punishment is a more effective deterrent than an equivalent increase in the probability of punishment. This result contrasts with the findings of the empirical crime literature.

Environmental Markets: What Do We Learn from the Lab?

In recent years, some of the most influential policies have been either tested or evaluated using experimental methods. Experiments have provided significant insights on the implications of different designs on market outcomes and the lessons learned have helped improve academic debate and the interaction between policy makers and researchers. In this paper, we provide an overview of experiments relating to environmental markets. Expenditure on environmental programs has been growing in importance yet it is controversial in current times due to the fiscal cuts around the world. Finding cost-effective ways of reaching environmental goals is thus an objective of most governments. Research using experiments can help isolate how individuals and regulators would respond to incentives and therefore identify the most effective programs.

Behavioral Insights from Field Experiments in Environmental Economics

Many environmental decisions are based on intrinsic motivations in addition to traditional economic incentives. Field experiments allow researchers to isolate a specific causal mechanism which can help advance our understanding of consumer and firm behavior in environmental markets. This article summarizes the literature on the use of field experiments in environmental economics, focusing on framed and artefactual field experiments as well as natural experiments targeting municipal energy and water demand. We set out a theoretical framework to improve the interpretation of results from field experiments in environmental economics. In addition to providing an overview of experimental methods and findings we also lay out a set of challenges for researchers interested in running a field experiment in environmental economics.

Will unit pricing reduce domestic waste? Lessons from a contingent valuation study

This paper estimates the effect of introducing unit pricing for municipal domestic waste collection and disposal in Christchurch. The price effect is shown in a demand model estimation using data collected in a contingent valuation survey of Christchurch households conducted in 2003. The results show a small but significant price effect. Households on higher incomes exhibit a larger price effect than do those on low incomes. Private service is indicated as the most preferred option for substituting away from municipal service, followed closely by composting, compaction, and recycling. The number of households participating in substitute activities that divert waste from landfill is shown to increase.

EMISSION TAXES, CLEAN TECHNOLOGY COOPERATION, AND PRODUCT MARKET COLLUSION: EXPERIMENTAL EVIDENCE: EMISSION TAX, CLEAN R&D COOPERATION, AND COLLUSION

We use a laboratory experiment to study the link between cooperative research and development (R&D) in clean technology and collusion in a downstream product market in the presence of a time‐consistent emissions tax. Such a tax creates additional interconnections between firms, in addition to the standard technological spillovers. Our results show a strong link between R&D cooperation and market collusion under symmetric R&D spillovers in a duopoly, but when the spillovers are asymmetric, R&D cooperation does not necessarily result in collusion. With symmetric spillovers, the link between R&D cooperation and collusion remains strong even in three‐ and four‐firm industries. (JEL C90, L5, O30, Q55)

The efficiency of market-assisted choice: an experimental analysis of mobile phone connection service recommendations

This paper reports an experiment in which participants were allowed an hour to find the cheapest mobile phone plan for a specific usage remit and were given either (a) access to an offline archive of provider websites or (b) access to the Internet. They were required to think aloud, and recordings were made of what they said and what transpired on their computer screens. Access to comparison sites and other market institutions resulted in significantly cheaper plans being selected on average. Within the group of online subjects, excess costs of recommended plans were inversely related to the time spent using market institutions. Although the designs of comparison websites sometimes hampered decision making, outcomes were generally enhanced by the ability to use these online market institutions.