Pollution, partial privatization and the effect of ambient charges: price competition

Nonpoint pollution arises from dispersed sources and lacks direct monitoring. Observing individual abatement levels or discharges is generally impractical. This paper addresses the economic incentives for controlling nonpoint pollution, which differs from point source pollution due to difficulties in monitoring individual polluting actions. The paper examines a mixed Bertrand duopoly model where there are two firms: a private firm and a partially privatized public firm that is jointly owned by the public and private sectors. The model of the paper uses ambient charges as a policy measure for reducing industrial nonpoint source pollution. This paper shows that ambient charges are an effective policy measure.