Is Regulation by Milestones Efficiency Enhancing?– An Experimental Study of Environmental Protection

Viewing individual contributions as investments in emission reductionwe rely on the familiar linear public goods-game to set global reductiontargets which, if missed, imply that all payoffs are destroyed witha certain probability. Regulation by milestones does not only impose afinal reduction target but also intermediate ones. In our leading examplethe regulating agency is Mother Nature but our analysis can, of course,be applied to other regulating agencies as well. We are mainly testing formilestone effects by varying the size of milestones in addition to changingthe marginal productivity of individual contributions and the probabilityto lose.