act quicklyand wiselyon the basis of the information they receive. This means in particular that
potential victims and stakeholders can access the judicial system at a reasonable cost and that the
latter is effective in bringing non-compliant polluters back into compliance. Several authors have
indeed emphasized the ‘‘institutional complementarity’’ between informational regulation on the
one hand and the legal empowerment of private parties on the other (see, e.g., [27]). Second, the
information provided must also be of reasonablygood quality, considering the costs associated
with producing, disseminating and processing data. From a public policyperspective this raises a
number of positive and normative questions concerning, for instance, the accuracyof firm-specific
information that would be voluntarilydisclosed, the level of information provision that would be
sociallydesirable, and the appropriate extent of mandatorystandards for environmental risk
disclosure. This paper seeks to address these questions.
Our theoretical studyconfronts a potential polluter with some major stakeholder. The former
maygather and disclose more or less precise data documenting the impact of his activityon
human health and the environment. The latter may approve or boycott the activity, given the a
priori information she alreadyhas and the qualityof the additional data she receives. This
thought-experiment is cast into a simple game of incomplete information which combines features
of signalling games (see, for instance, [12]) and of persuasion games (see, for instance, [19]). The
figures disclosed first act as a strategic signal of whether or not the activityentails significant
hazards to human health and the environment. At the same time, however, the supplied data
conveysubstantive information concerning the activityitself : in a decision-theoretic sense they
provide one further test that the stakeholder can use, if she deems it useful, to update her
subjective risk assessment. This test would of course be subject to type I (suggesting to boycott an
otherwise safe activity) and type II (recommending approval of a truly dangerous activity) errors.
The probabilityof not making such errors, which is usuallyreferred to as the accuracyor precision
of the data, formallycaptures the qualityof the released information.
This rather abstract model seems to fit manyconcrete situations. To fix ideas some illustrative
cases are outlined in Table 1.
Taking stock of the accounting and
Economics literatures, where the analysis of disclosures is a
long-standing topic, a number of alternative and perhaps richer models of disclosure could also be
1The main rationales for this so-called ‘‘informational regulation’’ are presented and discussed in [17,24,27]. There is
also a young and growing literature that centers on the effectiveness of public environmental disclosures in various
countries (see, e.g., [1,3,15,16], and the current surveybyTietenberg and Wheeler [27]).
378 B. Sinclair-Desgagne!, E. Gozlan / Journal of Environmental Economics and Management 45 (2003) 377–393
Table 1
Some illustrative cases
Case 1. Environmental permits
In its ‘‘
Reference Guide for Public Involvement in Environmental Permits [30]’’ the US Environmental Protection
Agencyidentifies and describes four major milestones in the permitting processes respectivelystipulated under the
Clean Air A
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