Information Disclosure as Environmental Regulation: A Theoretical Analysis

Mark A. Cohen, V. Santhakumar
2006 Social Science Research Network  
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
more » ... come 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 pollutiononly one of which is subject to information disclosure.
doi:10.2139/ssrn.922487 fatcat:kjxvglquznhnplwvsnutuzjjv4