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Emission taxes and environmental R&D risk choices in a duopoly market

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  • Xing, Mingqing
  • Tan, Tingting
  • Wang, Xia

Abstract

This study investigates how an emission tax rate affects risk choices in environmental research and development (ER&D) in Cournot and Bertrand duopolies. Firms choose the variance of their ER&D projects and compete in a differentiated product market. We find that the degree of risk increases in the emission tax rate and decreases in the degree of product differentiation. We further find that firms take considerable welfare risks when the emission tax rate is high relative to marginal environmental damage. Moreover, we find that firms choose riskier projects under Bertrand competition than under Cournot competition. This study helps firm managers choose appropriate ER&D projects in their competitive environments and helps policymakers formulate reasonable environmental tax policies.

Suggested Citation

  • Xing, Mingqing & Tan, Tingting & Wang, Xia, 2021. "Emission taxes and environmental R&D risk choices in a duopoly market," Economic Modelling, Elsevier, vol. 101(C).
    • Handle: RePEc:eee:ecmode:v:101:y:2021:i:c:s026499932100119x
    DOI: 10.1016/j.econmod.2021.105530
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    Cited by:

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    3. Chen, Hung-Yi & Yang, Ya-Po & Hu, Jin-Li, 2023. "Environmental taxes under mixed duopoly: The roles of privatization and foreign eco-technology," Economic Modelling, Elsevier, vol. 126(C).
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    5. Xia Wang & Tingting Tan & Mingqing Xing, 2022. "Environmental awareness of the private firm and optimal privatization in a mixed duopoly," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(8), pages 4055-4063, December.
    6. Lee, Chien-Chiang & Hussain, Jafar, 2023. "Energy sustainability under the COVID-19 outbreak: Electricity break-off policy to minimize electricity market crises," Energy Economics, Elsevier, vol. 125(C).

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    More about this item

    Keywords

    Risk; Environmental R&D; Emission tax; Duopoly;
    All these keywords.

    JEL classification:

    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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