When a firm undertakes activities which are risky for the environment, the conflict between social and private incentives to exercise safety care requires imposing fines in case a damage occurs. Introducing asymmetric information on the firm's wealth, we show that the fines and probabilities of...

We characterize the optimal regulation of a firm that undertakes an environmentally risky activity. This firm (the agent) is protected by limited liability and bound by contract to a stakeholder (the principal). The level of safety care exerted by the agent is nonobservable. This level of care...

When a firm undertakes risky activities, the conflict between social and private incentives to exercise safety care requires public intervention. This control takes the form of both monetary incentives but also monitoring taking place either ex ante or ex post, i.e. before or after an accident...