Information Provision in Environmental Policy Design

Abstract

Information provision is a relatively recent but steadily growing environmental policy tool. Its emergency and topicality are due to the current escalation of ecological threats. Meanwhile, its high complexity and flexibility require a comprehensive approach to its design, which has to be tailored for specific characteristics of production process, market structure, and regulatory goals. This work proposes such an approach and builds a framework based on a three-level mathematical program extending well-known two-level Stackelberg game by introducing one more economic agent and one extra level of this sequential game. This study provides simple and very intuitive algorithms to compute optimal multi-tier information provision policies, both mandatory and voluntary. The paper urges for the wide implementation of such efficient environmental policy design tools.