Taxing incumbent monopoly to foster entry
AbstractThis paper investigates whether it is welfare enhancing to tax the output of a monopoly in order to foster cost-inefficient entry. This question is of particular concern in the energy markets dominated by cartel-like affiliations (OPEC and oil, Russia's gas exports to Europe) and the interest and practice to stimulate the development of alternative fuels. Making the realistic assumption that none of the players can commit to future policies, subsidies are not a viable strategy for the government. A tax cannot be first best but can be second best if the government cannot force the incumbent monopoly to sell its output at no profit and if the incumbent's profit is discounted. However, stimulating supply by improving the conditions for entry is not the prime concern of taxation (after all it lowers aggregate supplies and may even lower the entrant's supply) but to accrue parts of the monopoly rent.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Energy Economics.
Volume (Year): 33 (2011)
Issue (Month): 3 (May)
Contact details of provider:
Web page: http://www.elsevier.com/locate/eneco
Sluggish entry Taxing monopoly Lack of commitment Dynamic game;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Palokangas, Tapio, 1994. "Taxation, cost-benefit analysis, and monopoly in an open economy," European Journal of Political Economy, Elsevier, vol. 10(3), pages 529-543, October.
- Strand, Jon, 2010. "Optimal fossil-fuel taxation with backstop technologies and tenure risk," Energy Economics, Elsevier, vol. 32(2), pages 418-422, March.
- Katsoulacos, Yannis & Xepapadeas, Anastasios, 1995.
" Environmental Policy under Oligopoly with Endogenous Market Structure,"
Scandinavian Journal of Economics,
Wiley Blackwell, vol. 97(3), pages 411-20, September.
- Katsoulacos, Yannis & Xepapadeas, Anastasios, 1994. "Environmental Policy Under Oligopoly with Endogenous Market Structure," CEPR Discussion Papers 955, C.E.P.R. Discussion Papers.
- Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
- Im, Jeong-Bin, 2002. "Optimal taxation of exhaustible resource under monopoly," Energy Economics, Elsevier, vol. 24(3), pages 183-197, May.
- Conrad, Klaus & Wang, Jianmin, 1993. "The effect of emission taxes and abatement subsidies on market structure," International Journal of Industrial Organization, Elsevier, vol. 11(4), pages 499-518.
- Dockner,Engelbert J. & Jorgensen,Steffen & Long,Ngo Van & Sorger,Gerhard, 2000. "Differential Games in Economics and Management Science," Cambridge Books, Cambridge University Press, number 9780521637329, December.
- Baffes, John, 1993. "Optimal Tax/Subsidy Intervention in Commodity Markets When the Groups of Interest Are Weighted Unequally," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 20(3), pages 365-78.
- De Fraja, Gianni, 1999.
"Regulation and access pricing with asymmetric information,"
European Economic Review,
Elsevier, vol. 43(1), pages 109-134, January.
- De Fraja, Gianni, 1995. "Regulation and Access Pricing with Asymmetric Information," CEPR Discussion Papers 1122, C.E.P.R. Discussion Papers.
- Gianni De Fraja, . "Regulation and Access Pricing with Asymmetric Information," Discussion Papers 95/5, Department of Economics, University of York.
- Lambert Schoonbeek & Frans Vries, 2009.
"Environmental taxes and industry monopolization,"
Journal of Regulatory Economics,
Springer, vol. 36(1), pages 94-106, August.
- Tahvonen, Olli, 1996. "Trade with Polluting Nonrenewable Resources," Journal of Environmental Economics and Management, Elsevier, vol. 30(1), pages 1-17, January.
- Franz Wirl, 2007. "Energy Prices and Carbon Taxes under Uncertainty about Global Warming," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 36(3), pages 313-340, March.
- Loeb, Martin & Magat, Wesley A, 1979. "A Decentralized Method for Utility Regulation," Journal of Law and Economics, University of Chicago Press, vol. 22(2), pages 399-404, October.
- Maskin, Eric S & Newbery, David M, 1990. "Disadvantageous Oil Tariffs and Dynamic Consistency," American Economic Review, American Economic Association, vol. 80(1), pages 143-56, March.
- Wirl, Franz, 2003. " Regulating Vertically Integrated Utilities When Transfers are Costly but Revenues are Beneficial," Public Choice, Springer, vol. 114(1-2), pages 175-95, January.
- Potters, J.J.M. & Sloof, R., 1996.
"Interest groups: A survey of empirical models that try to assess their influence,"
Open Access publications from Tilburg University
urn:nbn:nl:ui:12-73373, Tilburg University.
- Potters, Jan & Sloof, Randolph, 1996. "Interest groups: A survey of empirical models that try to assess their influence," European Journal of Political Economy, Elsevier, vol. 12(3), pages 403-442, November.
- Wirl Franz, 1994. "Pigouvian Taxation of Energy for Flow and Stock Externalities and Strategic, Noncompetitive Energy Pricing," Journal of Environmental Economics and Management, Elsevier, vol. 26(1), pages 1-18, January.
- Juan Pablo Montero & Matti Liski., 2009.
"On Coase and Hotelling,"
Documentos de Trabajo
351, Instituto de Economia. Pontificia Universidad Católica de Chile..
- Johannes Horner & Morton I. Kamien, 2004. "Coase and Hotelling: A Meeting of the Minds," Journal of Political Economy, University of Chicago Press, vol. 112(3), pages 718-723, June.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.