Time to Come Clean? Disclosure and Inspection Policies for Green Production

• 成果类型: Article
• 署名作者: Kim, Sang-Hyun
• 署名单位: Yale University
• 刊物名称: OPERATIONS RESEARCH
• ISSN/ISSBN: 0030-364X
• DOI: 10.1287/opre.2015.1345
• 发表日期: 2015
• 页码: 1-20
• 关键词: optimal law-enforcement; pollution; CONSEQUENCES; remediation; RECOVERY

摘要

We examine the interplay between two important decisions that impact environmental performance in a production setting: inspections performed by a regulator and noncompliance disclosure by a production firm. To preempt the penalty that will be levied once a compliance violation is discovered in an inspection, the firm dynamically decides whether it should disclose a random occurrence of noncompliance. Anticipating this, the regulator determines inspection frequency and penalty amounts to minimize environmental and social costs, performing either random inspections or periodic inspections. We study this problem by developing a novel analytical framework that combines features from reliability theory and law enforcement economics. We find that, contrary to common belief, surprising the firm with random inspections is not always preferred to inspecting the firm periodically according to a set schedule. We also find that the firm's opportunistic disclosure timing behavior may lead to a partial disclosure equilibrium in which the substitutable relationship between inspection intensity and penalty is reversed; a threat of increased penalty is accompanied by more frequent inspections.