Abstract
This article presents a basic model, built from concepts drawn from economics, that supports the application of optimal fines to violators of environmental regulations; it proposes a way to disincentivize offenders' interests and a method for achieving compensatory effects for environmental damage caused. It also highlights the advantages of pecuniary administrative sanctions (fines) over criminal sanctions, particularly incarceration, based on establishing a contractual relationship between the offending agent (the company) and the principal (the regulatory entity) in order to determine an effective sanction design through this relationship. The concepts of public goods, common goods, and externalities are used as categories of analysis to identify and assess environmental damage. Then, through the principal-agent model, the effectiveness of sanctioning strategies for encouraging regulatory compliance in the environmental context is examined, with particular attention to the random monitoring proposed for identifying and sanctioning offending agents.
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