The effectiveness of environmental inspections in oligopolistic markets

This study focuses on the consequences of inducing compliance with environmental legislation through inspections in oligopolistic markets. Adherence to the law is associated with environmental gains, but also with losses in surpluses as firms incur abatement costs. By relating the net social benefit of deterring breaches of legislation to inspection costs, the impact of various market characteristics on the effectiveness of inspections can be assessed, thus providing guidance for environmental inspection agencies that have to prioritize among sectors given a fixed budget.