Richard Cabe

The regulation of non-point-source pollution under imperfect and asymmetric information

Abstract This paper develops a Bayesian framework for discussing the role of information in the design of non-point-source pollution control mechanisms. An ambient concentration tax is examined, allowing for spatial transport among multiple zones. Imposition of the tax requires costly measurement of concentrations in selected zones, and the selection of zones for measurement must be undertaken without perfect information regarding several parameters of the problem. Potentially crucial information issues discussed include: (a) the impact of asymmetric priors regarding fate and transport, (b) the cost of measuring ambient concentration, and (c) the optimal acquisition of information regarding fate and transport.