Testing ambient pollution instruments with heterogeneous agents

This paper investigates the ability of ambient pollution instruments to induce a group of heterogeneous agents to choose a target outcome. Six controlled laboratory sessions were conducted with heterogeneous agents facing ambient pollution instruments with lumpsum or proportional fines and bonuses. Sessions are compared with a study of these exogenous targeting instruments and homogeneous agents using complete information and certainty (J. Public Econ. 84 (2) (2002) 427). The data show that contracts can indeed be developed that induce heterogeneous groups to choose the target outcome; however, substantial inefficiency and inequality were observed.