Information Disclosure as Environmental Regulation: A Theoretical Analysis |
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Authors: | Mark A Cohen V Santhakumar |
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Institution: | (1) Owen Graduate School of Management, Vanderbilt University, Nashville, TN 37203, USA;(2) Centre for Development Studies, Trivandrum, 695011, Kerala, India |
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Abstract: | Governments around the world are beginning to embrace a new form of environmental regulation – mandatory disclosure of information.
While information disclosure programs appear to have an impact on subsequent firm behavior – often resulting in lower levels
of pollution – little is known about the costs and benefits of these programs and whether or not they enhance social welfare.
This paper presents a simple bargaining model where mandatory information disclosure is used to overcome a lack of information
on the part of the public. We characterize the conditions under which information disclosure will lead to a reduction in emissions,
and ultimately, the conditions under which it will enhance social welfare. Several extensions of the model are briefly explored,
including the effect of two sources of pollution – only one of which is subject to information disclosure.
This paper was prepared while V. Santhakumar was a Visiting Scholar at the Vanderbilt Center for Environmental Management
Studies, Vanderbilt University. |
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Keywords: | information disclosure environmental regulation Coase theorem asymmetric information |
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