We investigate the features of optimal regulatory policies composed of pollution standards and probabilities of inspection, where fines for non-compliance depend not only on the degree of violation but also on non-gravity factors. We show that optimal policies can induce either compliance or...

We study optimal policies composed of pollution standards, probabilities of inspection and fines dependant on the degree of noncompliance with the standards, in a context where regulated firms own private information. In contrast with previous literature, we show that optimal policies, being...