Jaffe and Palmer (1997) present three distinct variants of the so- called Porter Hypothesis. The “weak” version of the hypothesis posits that environmental regulation will stimulate certain kinds of environmental innovations. The “narrow” version of the hypothesis asserts that flexible...

We focus in this paper on the effects of court errors on the optimal sharing of liability between firms and financiers, as an environmental policy instrument. Using a structural model of the interactions between firms, financial institutions, governments and courts we show, through numerical...