Different levels of water quality information lead to different behaviorEnhanced water quality information improves social efficiency Abstract: Stemming from Segerson [1988], literature on nonpoint source pollution shows that ambient-based regulatory policies can induce polluters in a common watershed to comply with an exogenously determined emissions standard. This study uses laboratory economic experiments in a spatially heterogeneous setting to test the effectiveness of an ambient tax/subsidy policy in a setting with realistic in-stream nutrient transport dynamics when varying levels of ambient information about the pollution is available to the agents and the regulator. We find that increasing the frequency of ambient monitoring improves the spatial allocation of emissions reductions. In particular with more frequent monitoring, the ambient-based policy induces firms further from the monitoring point to reduce emissions significantly more than downstream firms. Overall, the results suggest that enhanced information, especially enhanced temporal resolution, leads to efficiency gains.Index terms: 6309 1880 1846 0478

Using a threshold public bad game, we perform an experiment to test the effects of communication on coordination failure with various levels of threshold uncertainty. We apply two communication treatments to the coordination game: cheap talk between group members (unrestricted) and anonymous written communication from one generation of subjects to another (restricted). We find that the probability of groups coordinating and reaching the socially preferred equilibrium increases significantly with cheap talk and increases moderately with written communication. Repeated communication through cheap talk leads to a higher probability of achieving a set of payoff-dominant equilibria even in the face of threshold uncertainty.

Behavioral research on natural resource management has revealed a number of variables that can impact collective action. This research builds upon an interactive decision game using experimental economics methods with a focus on production decisions and the corresponding impact they have on ambient water quality. Using hierarchical clustering algorithms, four primary types of behavior are identified: competitive, hypercompetitive, cooperative, and hypercooperative. The results from the experiment are used to test the following three hypotheses: (1) financial incentives increase cooperative behavior, (2) increasing the number and frequency of water quality sensors increases cooperative behavior, and (3) the spatial location of the agents and sensors affect cooperative behavior. Mixed-effect multinomial logistic models reveal that policy incentives, sensor location, and frequency of sensing alter the behavioral strategies of decision makers in the experiment and that outcomes vary by spatial location. From a watershed planning perspective, minimal investments in advanced environmental monitoring/sensing systems can potentially have large effects in improving water quality; however, there is also some evidence of marginal diminishing returns associated with such investments.

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