Advanced Search
MyIDEAS: Login to save this article or follow this journal

When does environmental regulation facilitate entry-deterring practices

Contents:

Author Info

  • Espínola-Arredondo, Ana
  • Muñoz-García, Félix

Abstract

This paper evaluates the welfare benefits of introducing environmental regulation in a market that is subject to the threat of entry. We consider complete and incomplete information settings, where potential entrants use the regulator's tax policy and the incumbent's output decisions in order to infer the incumbent's cost structure. When the regulator is absent, we show that firms' entry-deterring practices increase pollution relative to complete information. Hence, under certain conditions, environmental regulation becomes more beneficial in incomplete than in complete information contexts. Our results, therefore, identify under which cases an under- or over-estimation of the welfare benefits of environmental regulation arises from ignoring the information setting in which firms interact. We also examine how this estimation error increases as firms become more symmetric in their production costs.

Download Info

If 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.
File URL: http://www.sciencedirect.com/science/article/pii/S0095069612000630
Download Restriction: Full text for ScienceDirect subscribers only

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 Info

Article provided by Elsevier in its journal Journal of Environmental Economics and Management.

Volume (Year): 65 (2013)
Issue (Month): 1 ()
Pages: 133-152

as in new window
Handle: RePEc:eee:jeeman:v:65:y:2013:i:1:p:133-152

Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/622870

Related research

Keywords: Entry deterrence; Signaling; Emission fees; Welfare benefits;

References

References listed on IDEAS
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.:
as in new window
  1. Barigozzi, Francesca & Villeneuve, Bertrand, 2006. "The signaling effect of tax policy," Economics Papers from University Paris Dauphine, Paris Dauphine University 123456789/5402, Paris Dauphine University.
  2. Harrington, Joseph E, Jr, 1986. "Limit Pricing When the Potential Entrant Is Uncertain of Its Cost Function [Limit Pricing and Entry under Incomplete Information: An Equilibrium Analysis]," Econometrica, Econometric Society, Econometric Society, vol. 54(2), pages 429-37, March.
  3. Milgrom, Paul & Roberts, John, 1982. "Predation, reputation, and entry deterrence," Journal of Economic Theory, Elsevier, Elsevier, vol. 27(2), pages 280-312, August.
  4. Kay, J A & Thompson, D J, 1986. "Privatisation: A Policy in Search of a Rationale," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 96(381), pages 18-32, March.
  5. Stavins, Robert N., 1996. "Correlated Uncertainty and Policy Instrument Choice," Journal of Environmental Economics and Management, Elsevier, Elsevier, vol. 30(2), pages 218-232, March.
  6. Antelo, Manel & Loureiro, Maria L., 2009. "Asymmetric information, signaling and environmental taxes in oligopoly," Ecological Economics, Elsevier, Elsevier, vol. 68(5), pages 1430-1440, March.
  7. Lee, Sang-Ho, 1999. "Optimal Taxation for Polluting Oligopolists with Endogenous Market Structure," Journal of Regulatory Economics, Springer, Springer, vol. 15(3), pages 293-308, May.
  8. David B. Ridley, 2009. "Herding versus Hotelling: Market Entry with Costly Information," Levine's Working Paper Archive 814577000000000174, David K. Levine.
  9. Lambert Schoonbeek & Frans Vries, 2009. "Environmental taxes and industry monopolization," Journal of Regulatory Economics, Springer, Springer, vol. 36(1), pages 94-106, August.
  10. Milgrom, Paul & Roberts, John, 1986. "Price and Advertising Signals of Product Quality," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 94(4), pages 796-821, August.
  11. Buchanan, James M, 1969. "External Diseconomies, Corrective Taxes, and Market Structure," American Economic Review, American Economic Association, American Economic Association, vol. 59(1), pages 174-77, March.
  12. Shaffer, Sherrill, 1995. "Optimal Linear Taxation of Polluting Oligopolists," Journal of Regulatory Economics, Springer, Springer, vol. 7(1), pages 85-100, January.
  13. Roberts, Marc J. & Spence, Michael, 1976. "Effluent charges and licenses under uncertainty," Journal of Public Economics, Elsevier, Elsevier, vol. 5(3-4), pages 193-208.
  14. Farrell, Joseph, 1987. "Information and the Coase Theorem," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 1(2), pages 113-29, Fall.
  15. Segerson, Kathleen, 1988. "Uncertainty and incentives for nonpoint pollution control," Journal of Environmental Economics and Management, Elsevier, Elsevier, vol. 15(1), pages 87-98, March.
  16. Xepapadeas, A. P., 1991. "Environmental policy under imperfect information: Incentives and moral hazard," Journal of Environmental Economics and Management, Elsevier, Elsevier, vol. 20(2), pages 113-126, March.
  17. In-Koo Cho & David M. Kreps, 1997. "Signaling Games and Stable Equilibria," Levine's Working Paper Archive 896, David K. Levine.
  18. M. L. Weitzman, 1973. "Prices vs. Quantities," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 106, Massachusetts Institute of Technology (MIT), Department of Economics.
  19. Katsoulacos, Yannis & Xepapadeas, Anastasios, 1995. " Environmental Policy under Oligopoly with Endogenous Market Structure," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 97(3), pages 411-20, September.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Ana Espinola-Arredondo & Felix Munoz-Garcia, 2013. "Can Poorly Informed Regulators Hinder Competition?," Working Papers, School of Economic Sciences, Washington State University 2013-3, School of Economic Sciences, Washington State University.
  2. Boying Liu & Ana Espinola-Arredondo, 2013. "The Impact of Environmental Taxes on Firms' Technology and Entry Decisions," Working Papers, School of Economic Sciences, Washington State University 2013-2, School of Economic Sciences, Washington State University.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:jeeman:v:65:y:2013:i:1:p:133-152. See general information about how to correct material in RePEc.

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.