CONTRACTING FOR NONPOINT-SOURCE POLLUTION ABATEMENT
By: Bystrom, Olof; Bromley, Daniel W.
Bystrom, Olof; Bromley, Daniel W., CONTRACTING FOR NONPOINT-SOURCE POLLUTION ABATEMENT, Journal of Agricultural and Resource Economics, Volume 23, Issue 1, July 1998, Pages 20-38
This study presents an incentive scheme to control agricultural nonpoint-source pollution. The analysis is based on a principal-agent framework with two parties: farmers and a regulating authority. Our incentive scheme proposes collective penalties as a way to control pollution. Unlike previous analyses of incentive schemes to control agricultural pollution, we suggest nonindividual contracts between farmers and a regulating authority, where farmers can trade pollution abatement efforts. Findings show that the information requirement of a regulatory agency can be substantially reduced if contracts can be made nonindividual.