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Group incentives can and have been used to address a range of environmental and resource problems. These schemes base individual penalties and/or rewards on the performance of a group of individuals or firms who contribute to the environmental or resource problem. The economics literature on team incentives and public goods, as well as the literature specifically on environmental and natural resource management, provides insights into the design of group incentives. This article reviews the literature on group incentives in the context of environmental protection and natural resource policy. This literature suggests that group incentives can be effective and even efficient as environmental policy tools. However, the outcomes under group incentives will likely depend on a combination of the policy design and the nature of the internal group interactions. Within-group interactions are likely to be particularly important when policies involve thresholds so that coordination is needed to reach a cooperative equilibrium. Expected final online publication date for the Annual Review of Resource Economics, Volume 14 is October 2022. Please see http://www.annualreviews.org/page/journal/pubdates for revised estimates.
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This content will become publicly available on April 28, 2026
Colluding Against Environmental Regulation
Abstract We study collusion among firms against imperfectly monitored environmental regulation. Firms increase variable profits by violating regulation and reduce expected noncompliance penalties by violating jointly. We consider a case of three German automakers colluding to reduce the effectiveness of emissions control technology. By estimating a structural model of the European automobile industry from 2007 to 2018, we find that collusion lowers expected noncompliance penalties substantially and increases buyer and producer surplus. Due to increased pollution, welfare decreases by € 1.57–5.57 billion. We show how environmental policy design and antitrust play complementary roles in preventing noncompliance.
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- PAR ID:
- 10650682
- Editor(s):
- Molinari, Francesca
- Publisher / Repository:
- Review of Economic Studies
- Date Published:
- Journal Name:
- Review of Economic Studies
- ISSN:
- 0034-6527
- Format(s):
- Medium: X
- Sponsoring Org:
- National Science Foundation
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