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Green Alliances: Are They Beneficial when Regulated Firms are Asymmetric?

Author

Listed:
  • John C. Strandholm

    (University of South Carolina Upstate)

  • Ana Espinola-Arredondo

    (Washington State University)

  • Felix Munoz-Garcia

    (Washington State University)

Abstract

In this paper, we analyze the collaboration between an environmental group (EG) and polluting firms when they are asymmetric in their abatement costs. We find that, as firms become more asymmetric, the EG collaborates more with the firm suffering from an abatement cost disadvantage, but this additional collaboration does not overcome firms’ cost asymmetry, producing an overall decrease in total abatement and an increase in total emissions. We also evaluate the welfare effects of introducing an EG and/or a regulator, finding that the latter generally yields larger welfare gains than the former when neither are present. Unlike previous studies, we show that the welfare benefit from a second agent is, under most settings, largest when firms are more asymmetric in their abatement costs.

Suggested Citation

  • John C. Strandholm & Ana Espinola-Arredondo & Felix Munoz-Garcia, 2022. "Green Alliances: Are They Beneficial when Regulated Firms are Asymmetric?," Journal of Industry, Competition and Trade, Springer, vol. 22(2), pages 145-178, June.
    • Handle: RePEc:kap:jincot:v:22:y:2022:i:2:d:10.1007_s10842-022-00384-w
    DOI: 10.1007/s10842-022-00384-w
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    References listed on IDEAS

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