Environmental conflicts with reimbursement: experimental evidence

Most environmental laws, such as the Clean Water Act. Clean Air Act and Endangered Species Act, include provisions that encourage private enforcement by empowering citizens and NGOs to file suit against negligent firms and government agencies, One element of these 'citizen suits' is that the citizens' legal costs are reimbursed if they win, while those of a winning firm or agency are not. This paper follows previous theoretical work with an experimental investigation of alternative reimbursement rules, including the asymmetric reimbursement structure prescribed in many U.S. environmental laws. Results suggest that reimbursement increases the social cost of enforcement. and in the case of asymmetric reimbursement. the increased cost falls disproportionately upon the defending firm or government agency.