Working Paper BETA #2002-20

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Title : Efficiency of Nonpoint Source Pollution Instruments with Externality Among Polluters:An Experimental Study

Author(s) : François Cochard, Marc Willinger, Anastasios Xepapadeas

Abstract : In nonpoint source pollution problems, the regulator does not observe each polluter’s individual emission, which prevents him from using the conventional policy instruments. Therefore new instruments have been designed to regulate this type of pollution. In an experiment, we compare the efficiency of some of these instruments: an input based tax, an ambient tax, and a group fine. We assume that the polluters themselves are affected by environmental damages. A control session without any regulation is also carried out in order to study the “status quo” situation. Our experimental data show that the input tax is almost perfectly efficient and very reliable, and the group fine is fairly efficient and reliable. Both instruments improve welfare with respect to the status quo. On the contrary, the ambient tax decreases social welfare with respect to the status quo, and its effect is very unreliable.

Key-words : Environmental Economics, Experimental Economics, Nonpoint source pollution, Regulation, Input Tax, A

JEL Classification : C92, D62, H21, H3, Q12, Q18.