Abstract:
We analyse the regulation of nonpoint source pollution. In particular, we study the use of peer monitoring to sustain co-operative abatement by a group of polluters. Delegation to a group of polluters has sometimes been proposed under a policy of so called voluntary abatement accords. By solving the problem of a regulator who a priori does not know whether agents are co-operative or not, we explain some features of voluntary abatement accords. The analysis shows that the policy measure proposed in the literature for nonpoint source regulation - an ambient tax - may not be efficient.
