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Strategic Investment by a Regulated Firm

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Author Info
Amihai Glazer ()
Eckhard Janeba ()

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Abstract

A government's choice of regulatory stringency can depend on investments that a firm made in earlier periods. The regulated firm may therefore invest strategically, to effect the government's choice of regulation. To reduce its payment of emissions taxes, the firm may therefore reduce emissions below their socially optimal level. In contrast, a firm subject to regulation by quantity wants to reduce the stringency of regulations. A firm which invests little thereby reduces the marginal social cost of reducing emissions, and so can induce government to weaken its regulations. Copyright Kluwer Academic Publishers 2004

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File URL: http://hdl.handle.net/10.1023/B:ITAX.0000011396.10218.26
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Publisher Info
Article provided by Springer in its journal International Tax and Public Finance.

Volume (Year): 11 (2004)
Issue (Month): 2 (March)
Pages: 123-132
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:kap:apfinm:v:11:y:2004:i:2:p:123-132

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Web page: http://springerlink.metapress.com/link.asp?id=102851

For technical questions regarding this item, or to correct its listing, contact: (Christopher F. Baum).

Related research
Keywords: regulation; investment; credibility;

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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.:
  1. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law & Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
  2. Tornell, Aaron, 1991. "Time Inconsistency of Protectionist Programs," The Quarterly Journal of Economics, MIT Press, vol. 106(3), pages 963-74, August. [Downloadable!] (restricted)
  3. Eckhard Janeba, 2000. "Tax Competition When Governments Lack Commitment: Excess Capacity as a Countervailing Threat," American Economic Review, American Economic Association, vol. 90(5), pages 1508-1519, December. [Downloadable!] (restricted)
  4. Williamson, Oliver E, 1983. "Credible Commitments: Using Hostages to Support Exchange," American Economic Review, American Economic Association, vol. 73(4), pages 519-40, September. [Downloadable!] (restricted)
  5. David J. Salant & Glenn A. Woroch, 1992. "Trigger Price Regulation," RAND Journal of Economics, The RAND Corporation, vol. 23(1), pages 29-51, Spring. [Downloadable!] (restricted)
  6. Damania, R., 2001. "When the Weak Win: The Role of Investment in Environmental Lobbying," Journal of Environmental Economics and Management, Elsevier, vol. 42(1), pages 1-22, July. [Downloadable!] (restricted)
  7. Joskow, Paul L, 1987. "Contract Duration and Relationship-Specific Investments: Empirical Evidence from Coal Markets," American Economic Review, American Economic Association, vol. 77(1), pages 168-85, March. [Downloadable!] (restricted)
  8. Biglaiser, Gary & Horowitz, John K & Quiggin, John, 1995. "Dynamic Pollution Regulation," Journal of Regulatory Economics, Springer, vol. 8(1), pages 33-44, July.
  9. Richard J. Gilbert & David M. Newbery, 1994. "The Dynamic Efficiency of Regulatory Constitutions," RAND Journal of Economics, The RAND Corporation, vol. 25(4), pages 538-554, Winter. [Downloadable!] (restricted)
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This page was last updated on 2009-12-31.

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