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Environmental Taxation and Strategic Commitment in Duopoly Models

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  • Fredrik Carlsson

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Abstract

In this paper, we address the issue of optimalenvironmental taxation under imperfect competition.The problem is analysed for three different types ofduopoly models, the Cournot open and closed loopmodels, and the Stackelberg model. We explicitlyanalyse the role of strategic behaviour. Each firm hasto make a choice of output level and of the level ofa strategic variable. The choice of this strategicvariable affects both marginal cost and emissions. Wecompare the properties of these three duopoly models,and derive and compare optimal environmental taxes. Weshow that whether the optimal tax is lower or higherthan marginal environmental costs depends on theinformation transmission and the effect of thestrategic variable on marginal costs. In addition, thedifferences in market shares, and the influence of thetax on the cost structure play important roles, indetermining optimal emission taxes. Copyright Kluwer Academic Publishers 2000

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Bibliographic Info

Article provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.

Volume (Year): 15 (2000)
Issue (Month): 3 (March)
Pages: 243-256

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Handle: RePEc:kap:enreec:v:15:y:2000:i:3:p:243-256

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Web page: http://www.springerlink.com/link.asp?id=100263

Related research

Keywords: environmental taxation; oligopoly; optimal taxation; strategic commitment;

References

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  1. Simpson, R. David & Bradford, Robert III, 1996. "Taxing Variable Cost: Environmental Regulation as Industrial Policy," Journal of Environmental Economics and Management, Elsevier, vol. 30(3), pages 282-300, May.
  2. Buchanan, James M, 1969. "External Diseconomies, Corrective Taxes, and Market Structure," American Economic Review, American Economic Association, vol. 59(1), pages 174-77, March.
  3. Barnett, A H, 1980. "The Pigouvian Tax Rule under Monopoly," American Economic Review, American Economic Association, vol. 70(5), pages 1037-41, December.
  4. R. Simpson, 1995. "Optimal pollution taxation in a Cournot duopoly," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 6(4), pages 359-369, December.
  5. Carraro, Carlo & Soubeyran, Antoine, 1995. "Environmental Feedbacks and Optimal Taxation in Oligopoly," CEPR Discussion Papers 1156, C.E.P.R. Discussion Papers.
  6. Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
  7. Vives, Xavier, 1989. "Technological competition, uncertainty, and oligopoly," Journal of Economic Theory, Elsevier, vol. 48(2), pages 386-415, August.
  8. Katsoulacos, Yannis & Xepapadeas, Anastasios, 1994. "Environmental Policy Under Oligopoly with Endogenous Market Structure," CEPR Discussion Papers 955, C.E.P.R. Discussion Papers.
  9. Alistair fnUlph, 1996. "Environmental policy instruments and imperfectly competitive international trade," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 7(4), pages 333-355, June.
  10. Spencer, Barbara J. & Brander, James A., 1992. "Pre-commitment and flexibility : Applications to oligopoly theory," European Economic Review, Elsevier, vol. 36(8), pages 1601-1626, December.
  11. Damania, D., 1996. "Pollution Taxes and Pollution Abatement in an Oligopoly Supergame," Journal of Environmental Economics and Management, Elsevier, vol. 30(3), pages 323-336, May.
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Citations

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Cited by:
  1. Rupayan Pal, 2009. "Delegation and Emission Tax in a Differentiated Oligopoly," Working Papers id:2263, eSocialSciences.
  2. Rupayan Pal, 2012. "Delegation And Emission Tax In A Differentiated Oligopoly," Manchester School, University of Manchester, vol. 80(6), pages 650-670, December.
  3. Antelo, Manel & Loureiro, Maria L., 2009. "Asymmetric information, signaling and environmental taxes in oligopoly," Ecological Economics, Elsevier, vol. 68(5), pages 1430-1440, March.
  4. Fischer, Carolyn, 2003. "Market Power and Output-Based Refunding of Environmental Policy Revenues," Discussion Papers dp-03-27, Resources For the Future.
  5. Carlsson, F., 1999. "Incentive-based environmental regulation of domestic civil aviation in Sweden," Transport Policy, Elsevier, vol. 6(2), pages 75-82, April.
  6. Bárcena-Ruiz, Juan Carlos & Campo, María Luz, 2012. "Partial cross-ownership and strategic environmental policy," Resource and Energy Economics, Elsevier, vol. 34(2), pages 198-210.
  7. Erin T. Mansur, 2007. "Prices vs. Quantities: Environmental Regulation and Imperfect Competition," NBER Working Papers 13510, National Bureau of Economic Research, Inc.
  8. Stephan F. Hamilton & Till Requate, 2001. "Vertical Structure and Strategic Environmental Trade Policy," CESifo Working Paper Series 594, CESifo Group Munich.
  9. Requate, Till, 2005. "Environmental Policy under Imperfect Competition : A Survey," Economics Working Papers 2005,12, Christian-Albrechts-University of Kiel, Department of Economics.
  10. Carlsson , Fredrik, 2000. "Environmental Taxation in Airline Markets," Working Papers in Economics 24, University of Gothenburg, Department of Economics.
  11. Carlsson, Fredrik, 2002. "Airport Marginal Cost Pricing: Discussion and an Application to Swedish Airports," Working Papers in Economics 85, University of Gothenburg, Department of Economics.
  12. Manel Antelo, 2005. "Double informational asymmetry, signaling, and environmental taxes," Economic Working Papers at Centro de Estudios Andaluces E2005/25, Centro de Estudios Andaluces.

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