Waste Disposal and Public Cleansing Law: An Assignment Game Approach

Abstract

I model a waste disposal market under uncertainty of pollution damage by an assignment game between disposal firms and producers. My purpose is to compare social welfare with regard to responsibility under various legal systems that are supposed to prevent adverse selection or moral hazard. Among legal systems such as the negligence rule, strict liability, extended producer responsibility, and penalty systems, I observe certain advantages of the extended responsibility and the penalty system. I also obtain a condition under which the strict liability or the negligence rule yields higher social welfare than other systems.