On Social and Market Sanctions in Deterring non Compliance in Pollution Standards

and the decision is now independent of c. Moreover as V < R(A) then nobody will declare
his status. Hence we obtain the following result.

Proposition 5 A rebate for truthtelling is necessary for unvoluntary non compliance to be
declared, i.e. s < f.

Let us examine the inequality (2) more closely:

U (V - s - c) > pU (V - f - c) + (l - p)U (R(A) - c)

V - s - c > U ¹ [pU(V - f - c) + (l - p)U(R(X) - c)]

c + U ¹ [pU(V - f - c) + (l - p)U(R(A) - c)] < V - s

The LHS of this inequality is non monotonic in c so that the set of values for c such that the
inequality is satisfied is ambiguous at this level of generality.

4.2 The impact of information public disclosure

In the absence of public information on criminal records, the market forms beliefs so that the
expected revenue for any individual is given by

R^npi(A) = A(l - μ)r + (l - A + Aμ)(r - δ)

= r - (l - A(l - μ))5

where NP/ stands for non public information. Note that R^npi(A) > V = r - 5. Also R^npi

does not depend on p. Moreover, we have R^npi(A) < R(A). Indeed,

^{(l - A + pA)(l - p)}x _i_ Zi    XZ-I

r---,-----—o - r + (l - A(l - μ))o

l - p + Ap(l - μ)      ^{+(     (   P))}

^{(l - a +} M^{A)(l - p)}
l - p + Ap(l - μ)

Hence, if criminal records are non public, the expected market revenue is lower than the
expected market revenue under public criminal records and non conviction.

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