Two firms each have the option of polluting during production or cleaning up their production process such

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Two firms each have the option of polluting during production or cleaning up their production process such that they don't pollute. Of course, polluting is cheaper than not polluting. The payoffs for each of the choice combinations are shown in the decision matrix in Figure 9Q-2. The government would like to stop pollution by making it illegal and charging a fine if a firm is found polluting. How large does the fine need to be to keep a firm from polluting?

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Microeconomics

ISBN: 978-1259813337

2nd edition

Authors: Dean S. Karlan, Jonathan J. Morduch

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