Certification as a Rationale for Voluntary Agreements

I model the participation of firms in a voluntary agreement as a costly certification process whereby a firm informs the Regulator of its pollution intensity. Without this knowledge, the Regulator imposes the same tax on all firms in a heterogeneous industry, unduly hurting the clean ones with the lowest intensity. Certification allows clean firms to get a tax rebate. It also entails an informational externality as the dispersion of types decreases within the pool of non-participating firms, following an unraveling process. Because participation is a firm’s private decision, there is such a thing as a bad voluntary agreement.


Issue Date:
2011-11
Publication Type:
Working or Discussion Paper
DOI and Other Identifiers:
ISSN 1927-5544 (Other)
Record Identifier:
http://ageconsearch.umn.edu/record/117827
PURL Identifier:
http://purl.umn.edu/117827
Total Pages:
35
JEL Codes:
L51; Q53; Q58
Series Statement:
CREATE Working Paper
2011-2




 Record created 2017-04-01, last modified 2018-01-22

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