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Watershed Nutrient Trading Under Asymmetric Information

Published online by Cambridge University Press:  15 September 2016

Robert C. Johansson
Robert C. Johansson*
Affiliation:
The Resource and Environmental Policy Branch, Economic Research Service, U.S. Department of Agriculture, Washington, DC
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Abstract

This study evaluates first- and second-best trading policies for regulating watershed phosphorus under asymmetric information. The trading policies are differentiated on the degree to which regulators observe point and nonpoint source abatement efforts. The efficiency losses attributable to these informational asymmetries and those of the second-best policies can be measured in social welfare, and provide regulators the shadow value of foregoing first-best measures. Given representative monitoring costs from national water monitoring programs, it is shown that under asymmetric information, the chosen second-best trading policies outperform first-best policies by 11% in the control of watershed nutrient pollution.

Keywords

nonpoint sourcepermit tradingphosphoruspollutionwatershed
Type
Articles
Information
Agricultural and Resource Economics Review , Volume 31 , Issue 2 , October 2002 , pp. 221 - 232
Copyright
Copyright © 2002 Northeastern Agricultural and Resource Economics Association 

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