ambient environmental inspections in repeated enforcement games

Abstract

We consider an environmental inspection agency who credibly commits to a permanent observation of ambient pollution at the property line of individual firms. In this setting, standard results in the theory of repeated games generalize to enforcement games. The inspection agency obtains partial compliance without ever penalizing the polluter, even in settings where it would never obtain any compliance in the stage game. We identify under which conditions this is an improvement compared to a game where the agency does not collect prior information. Both equilibrium and out-of-equilibrium behavior can be given a nice intuitive interpretation.environmental enforcement; repeated games