ABSTRACT
The purpose of this paper is to develop and explore a theory dealing with an important facet of agricultural runoff problems. Agricultural runoff is a nonpoint externality with notable implications for both research and policy. A nonpoint externality exists whenever the externality contributions of individual economic agents cannot be practically measured by direct monitoring. Without monitoring, regulations on emissions cannot be enforced, and charges or subsidies cannot be assessed. Thus, policies which are usually suggested for pollution abatement are not available. There is great need for a theoretical base that can adequately capture these facts. Such a theory yields some important implications even before specific empirical applications.
