nep-reg New Economics Papers
on Regulation
Issue of 2006‒09‒03
five papers chosen by
Christian Calmes
Universite du Quebec en Outaouais, Canada
  1. Optimal Debt Contracts when Credit Managers are (Perhaps) Corruptible By Ingela Alger
  2. Optimal Design of Permit Markets with an Ex Ante Pollution Target By Rabotyagov, Sergey S.; Feng, Hongli; Kling, Catherine L.
  3. First Do No Harm?: Tort Reform and Birth Outcomes By Janet Currie; W. Bentley MacLeod
  4. Voluntary Environmental Agreements when Regulatory Capacity Is Weak By Blackman, Allen; Lyon, Thomas P.; Sisto, Nicholas
  5. High powered Incentives and Fraudulent Behavior: Stock based versus Stock Option based Compensation By R. Andergassen
  1. By: Ingela Alger (Boston College)
    Abstract: The paper derives the optimal organizational response of a bank (the principal) which faces a risk of collusion between the credit manager (the agent) and the credit-seeking firms. The bank can deter collusion either through internal incentives or by distorting the credit contracts. The model thus explicitly takes into account the interaction between internal (collusion) risks and external (default) risks in the optimal design of the internal organization as well as of the credit contracts. We investigate this question in two settings. In the first one, we adopt the standard assumption that the agent is always willing to collude (is corruptible) if that increases his monetary payoff. In the second one, he is corruptible with some probability only, and honest otherwise. A novel feature of our approach is to allow for screening among corruptible and honest agents. We find that if the probability that the agent is honest is sufficiently large, collusion occurs in equilibrium.
    Date: 2006–08–26
    URL: http://d.repec.org/n?u=RePEc:boc:bocoec:648&r=reg
  2. By: Rabotyagov, Sergey S.; Feng, Hongli; Kling, Catherine L.
    Abstract: In this paper, we examine the design of permit trading programs when the objective is to minimize the cost of achieving an ex ante pollution target, that is, one that is defined in expectation rather than an ex post deterministic value. We consider two potential sources of uncertainty, the presence of either of which can make our model appropriate: incomplete information on abatement costs and uncertain delivery coefficients. In such a setting, we find three distinct features that depart from the well-established results on permit trading: (1) the regulator’s information on firms’ abatement costs can matter; (2) the optimal permit cap is not necessarily equal to the ex ante pollution target; and (3) the optimal trading ratio is not necessarily equal to the delivery coefficient even when it is known with certainty. Intuitively, since the regulator is only required to meet a pollution target on average, she can set the trading ratio and total permit cap such that there will be more pollution when abatement costs are high and less pollution when abatement costs are low. Information on firms’ abatement costs is important in order for the regulator to induce the optimal alignment between pollution level and abatement costs.
    Keywords: delivery coefficient, ex ante pollution target, ex post pollution target, permit trading, total permit cap, trading ratio.
    Date: 2006–08–25
    URL: http://d.repec.org/n?u=RePEc:isu:genres:12667&r=reg
  3. By: Janet Currie; W. Bentley MacLeod
    Abstract: We examine the impact of tort reforms using U.S. birth records for 1989-2001. We make four contributions: First, we develop a model that analyzes the incentives created by specific tort reforms. Second, we assemble new data on tort reform. Third, we examine a range of outcomes. Finally, we allow for differential effects by demographic/risk group. We find that reforms of the "deep pockets rule" reduce complications of labor and C-sections, while caps on noneconomic damages increase them. Our results demonstrate there are important interactions between incentives created by tort law and other incentives facing physicians.
    JEL: I12 I18 K13
    Date: 2006–08
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:12478&r=reg
  4. By: Blackman, Allen (Resources for the Future); Lyon, Thomas P.; Sisto, Nicholas
    Abstract: Voluntary agreements (VAs) negotiated between environmental regulators and industry are increasingly popular. However, little is known about whether they are likely to be effective in developing and transition countries, where local and federal environmental regulatory capacity is typically weak. We develop a dynamic theoretical model to examine the effect of VAs on investment in regulatory infrastructure and pollution abatement in such countries. We find that under certain conditions, VAs can improve welfare by generating more private-sector investment in pollution control and more public-sector investment in regulatory capacity than the status quo.
    Keywords: voluntary environmental regulation, developing country
    JEL: Q28 O13 C72
    Date: 2006–07–03
    URL: http://d.repec.org/n?u=RePEc:rff:dpaper:dp-06-30&r=reg
  5. By: R. Andergassen
    Date: 2005
    URL: http://d.repec.org/n?u=RePEc:bol:bodewp:542&r=reg
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