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Christian-Albrechts-Universität zu Kiel

Institut für Volkswirtschaftslehre - Department of Economics
Economics Working Papers

Economics Working Papers: Abstract 2004-10




Eva Camacho, Till Requate




Collective and Random Fining versus Tax/Subsidy - Schemes to Regulate Non-Point Pollution: An Experimental Study
Abstract In this paper we present results of an experimental study on the performance of three mechanisms which are designed to deal with non-point source pollution: collective fining, random fining, and a tax-subsidy scheme. Our results show that collective and random fining schemes do not induce the subjects to play the e_cient equilibrium. Experience from participation in similar treatments further enforces the tendency to under-abate. The taxsubsidy mechanism, by contrast, induces the e_cient equilibrium action to be played more frequently than the fining mechanisms, with a slight tendency to over-abate. Experience enforces this tendency. Controlling for the subjects' risk attitude, we find that for risk averse subjects the random fining mechanism outperforms the collective fine.

Keywords: Non-point source pollution, environmental policy, collective fining, random fining, tax-subsidy scheme, experiments.

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