Environmental policy and stable collusion: The case of a dynamic polluting oligopoly
AbstractWe show that the imposition of a Markovian tax on emissions, that is, a tax rate which depends on the pollution stock, can induce stable cartelization in an oligopolistic polluting industry. This does not hold for a uniform tax. Thus, accounting for the feedback effect that exists within a dynamic framework, where pollution is allowed to accumulate into a stock over time, changes the result obtained within a static framework. Moreover, the cartel formation can diminish the welfare gain from environmental regulation such that welfare under environmental regulation and collusion of firms lies below that under a laissez-faire policy.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Dynamics and Control.
Volume (Year): 35 (2011)
Issue (Month): 4 (April)
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Web page: http://www.elsevier.com/locate/jedc
Pollution tax Oligopoly Cartel formation Coalition formation Differential game;
Other versions of this item:
- Benchekroun, H. & Ray Chaudhuri, A., 2008. "Collusion Inducing Taxation of a Polluting Oligopoly," Discussion Paper 2008-80, Tilburg University, Center for Economic Research.
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
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