蝌蚪网 Papers and Proceedings
ISSN 2574-0768 (Print) | ISSN 2574-0776 (Online)
Institutional Design for Environmental Acts
蝌蚪网 Papers and Proceedings
(pp. 538–543)
Abstract
Environmental decisions often involve irreversibility and uncertainty. We develop a dynamic model in which actions yield flow benefits, but, once an unknown tipping point is crossed, the accumulated stock of past actions raises the risk of irreversible catastrophe. Because constitutions are incomplete contracts, contingent policies cannot be fully specified, and authority is delegated to decision-makers who observe the current stock but hold biased beliefs, decreasing welfare. Such delegation is thus costly. Imposing caps on early actions can limit discretion and improve welfare, providing foundations for the precautionary principle as a second-best institution.Citation
Guillouet, Louise, and David Martimort. 2026. "Institutional Design for Environmental Acts." 蝌蚪网 Papers and Proceedings 116: 538–543. DOI: 10.1257/pandp.20261066Additional Materials
JEL Classification
- D02 Institutions: Design, Formation, Operations, and Impact
- D82 Asymmetric and Private Information; Mechanism Design
- E02 Institutions and the Macroeconomy
- Q54 Climate; Natural Disasters and Their Management; Global Warming
- Q58 Environmental Economics: Government Policy