Is the “average Pigouvian tax” robust to the size of the group of polluters?

We study the “average Pigouvian tax” (APT), an ambient-based policy instrument that requires polluters to cooperate to achieve the social optimum. In this paper, we are interested in the group size variation and its effect of the APT efficiency. Indeed, in the field, the implementation of the instrument will face group sizes that can vary from a few to a large number of farmers.We find that increasing the size of the group reduces cooperation among subjects, thereby reducing the efficiency of the instrument. We also show that when the sucker’s cost is lowered, the instrument can converge towards the social optimum