Discretionary enforcement and strategic interactions between firms, regulatory agency and justice department: a theoretical and empirical investigation

Germani, Anna Rita and Morone, Andrea and Morone, Piergiuseppe and Scaramozzino, Pasquale (2013): Discretionary enforcement and strategic interactions between firms, regulatory agency and justice department: a theoretical and empirical investigation.

Abstract

This paper presents a game theoretic morphological analysis of the U.S. environmental authorities’ (i.e., EPA and DOJ) behavioural mechanisms, based on strategic interactions among the players. The models explore the role of discretion that such authorities enjoy, either in deciding how to pursue environmental violations (investigative and prosecutorial discretion) or in judging them (judicial discretion). The purpose is to identify both the optimal firms’ behaviour in terms of compliance, and the DOJ’s and EPA’s optimal strategies in terms of enforcement actions to undertake. Consistent with the setting of the game theory models, the role of EPA and DOJ in deterring firms from polluting is, then, empirically tested, by means of a laboratory experiment. Laboratory evidence on compliance behaviour of firms when faced with enforcement conditions predicted by the theoretical models set up is discussed for the different experimental treatments performed.

• Item Type: MPRA Paper
• Language: English
• Keywords: environmental enforcement, discretion, game theory, experimental economics.
• Subjects: D - Microeconomics > D8 - Information, Knowledge, and Uncertainty; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D80 - General; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D81 - Criteria for Decision-Making under Risk and Uncertainty; K - Law and Economics > K0 - General; K - Law and Economics > K3 - Other Substantive Areas of Law > K32 - Environmental, Health, and Safety Law; K - Law and Economics > K4 - Legal Procedure, the Legal System, and Illegal Behavior > K42 - Illegal Behavior and the Enforcement of Law; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q50 - General; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q52 - Pollution Control Adoption and Costs ; Distributional Effects ; Employment Effects

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