JunJie Wu and Bruce A. Babcock (1999), ‘The Relative Efficiency of Voluntary vs Mandatory Environmental Regulations’, Journal of Environmental Economics and Management, 38, pp. 158-75.

Finally, we show that if d A R / d n < ( y / n ) AR, the relative efficiency of the two programs may be unstable when n is small. Equation (A6) indicates that if d A R / d n < ( y / n ) AR, it is possible that d ( U - L m) / d n > 0 even if U - L m < 0. Also, because g* decreases first and then increases as n increases from 1 to +°° (see Eq. (12)), Eq. (A2) indicates that it is possible that Lv - Lm may be negative initially, then becom e positive, and finally become negative again as n increases

Proof o f Proposition 2

d ( U - L m)

dy

d ( U - Lm) / AA

d ( U - L m)