CAN A COSTLY REPORTING SYSTEM MAKE ENVIRONMENTAL ENFORCEMENT MORE EFFICIENT

A formal mathematical model is developed to ascertain the effectivenes s of a reporting system for improving the enforcement of environmental laws and regulations when reports are costly. To model realistic enfo rcement problems arising over environmental issues such as compliance to water and air quality standards, a formal enforcement model is cons tructed using concepts from probability and statistics, non-cooperativ e game theory, and economics. In order to demonstrate clearly the bene fits gained when an environmental agency takes advantage of a reportin g system, a formal enforcement model with a costly reporting system is rigorously compared to one with no reporting system. The calculation and comparison of Nash equilibria for a range of values of model param eters indicates under what conditions a reporting system can be truly effective. Overall, it is found that a reporting system, such as whist le-blowing can be helpful for reducing violations of environmental sta ndards, thereby maintaining better environmental quality.