Empowering neighbors versus imposing regulations: An experimental analysis of pollution reduction schemes

Timothy Cason, Lata Gangadharan

Research output: Contribution to journalArticleResearchpeer-review

16 Citations (Scopus)

Abstract

This paper presents an experimental study of two mechanisms that influence incentives to reduce ambient pollution levels. In the formal mechanism individuals face a penalty if the group generates total pollution that exceeds a specified target, whereas in the informal mechanism individuals can choose to incur costs to punish each other after observing their group members emissions. We examine the effectiveness of these mechanisms, in isolation and in combination. The results suggest that the formal targeting mechanism is significantly more effective than informal peer punishment in reducing pollution and increasing efficiency. Peer punishment however improves the performance of the formal mechanism.
Original languageEnglish
Pages (from-to)469 - 484
Number of pages16
JournalJournal of Environmental Economics and Management
Volume65
Issue number3
DOIs
Publication statusPublished - 2013

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