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Optimal Linear Taxation of Polluting Oligopolists

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  • Shaffer, Sherrill

Abstract

A linear ad valorem tax can induce homogeneous oligopolists to produce at socially optimal levels, achieving the first-best allocation, in the presence of external costs that vary exogenously with aggregate output. The optimal tax rate is independent of private cost functions and thus reduces informational requirements on the regulator. Alternatively, if the regulator knows marginal private costs but not the pattern of firms' conduct or the slope of the demand curve, an iterative implementation of the tax is possible. Both blockaded and endogenous entry are considered, as is strategic behavior by firms toward the regulator. Copyright 1995 by Kluwer Academic Publishers

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Bibliographic Info

Article provided by Springer in its journal Journal of Regulatory Economics.

Volume (Year): 7 (1995)
Issue (Month): 1 (January)
Pages: 85-100

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Handle: RePEc:kap:regeco:v:7:y:1995:i:1:p:85-100

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Web page: http://www.springerlink.com/link.asp?id=100298

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Cited by:
  1. Aditi Sengupta, 2009. "Environmental Regulation and Industry Dynamics," Departmental Working Papers 0903, Southern Methodist University, Department of Economics.
  2. Fischer, Carolyn, 2003. "Market Power and Output-Based Refunding of Environmental Policy Revenues," Discussion Papers dp-03-27, Resources For the Future.
  3. James E. Prieger & Nicholas J. Sanders, 2011. "Verifiable and Non-Verifiable Anonymous Mechanisms for Regulating a Polluting Monopolist," Discussion Papers 10-034, Stanford Institute for Economic Policy Research.
  4. Yuanguang Yu, 2012. "An Optimal Ad Valorem Tax/Subsidy with an Output-Based Refunded Emission Payment for Permits Auction in an Oligopoly Market," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 52(2), pages 235-248, June.
  5. Erin T. Mansur, 2007. "Prices vs. Quantities: Environmental Regulation and Imperfect Competition," NBER Working Papers 13510, National Bureau of Economic Research, Inc.
  6. Lambert Schoonbeek & Frans Vries, 2009. "Environmental taxes and industry monopolization," Journal of Regulatory Economics, Springer, vol. 36(1), pages 94-106, August.
  7. Ross McKitrick, 1999. "A Cournot Mechanism for Pollution Control under Asymmetric Information," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 14(3), pages 353-363, October.
  8. Joanna Poyago-Theotoky, 2003. "Optimal environmental taxation, R&D subsidization and the role of market conduct," Discussion Paper Series, Department of Economics 200309, Department of Economics, University of St. Andrews.
  9. Espínola-Arredondo, Ana & Muñoz-García, Félix, 2013. "When does environmental regulation facilitate entry-deterring practices," Journal of Environmental Economics and Management, Elsevier, vol. 65(1), pages 133-152.
  10. Chung, Sung H. & Weaver, Robert D. & Friesz, Terry L., 2013. "Strategic response to pollution taxes in supply chain networks: Dynamic, spatial, and organizational dimensions," European Journal of Operational Research, Elsevier, vol. 231(2), pages 314-327.
  11. Shuichi Ohori, 2006. "Optimal Environmental Tax and Level of Privatization in an International Duopoly," Journal of Regulatory Economics, Springer, vol. 29(2), pages 225-233, 03.
  12. Trevor Tombe & Jennifer Winter, 2014. "Environmental Policy and Misallocation: The Productivity Effect of Intensity Standards," Working Papers 2013-29, Department of Economics, University of Calgary, revised 21 Feb 2014.
  13. Erin Mansur, 2013. "Prices versus quantities: environmental regulation and imperfect competition," Journal of Regulatory Economics, Springer, vol. 44(1), pages 80-102, August.

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