Nonpoint Source Regulation - A Self-Reporting Mechanism

Information feasible regulatory mechanisms (that do not require the regulator to acquire firm level information) have been proposed long ago for stochastic non-point emission problems. These mechanisms do not take polluter cooperation and firm entry–exit incentives simultaneously into account, nor are these issues addressed in an informationally efficient way. In this paper we propose an informationally feasible self-reporting mechanism that is robust to cooperation among polluters while giving participating firms correct abatement incentives as well as giving entry–exit incentives that are correct to a first order approximation.