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Selective penalization of polluters: an inf-convolution approach

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  • Ngo Long

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  • Antoine Soubeyran

Abstract

We consider an asymmetric polluting oligopoly. We demonstrate that optimal tax rates per unit of emission are not the same for all firms. We call this property selective penalization. Our Optimal Distortion Theorem states that the efficient tax structure requires that high cost firms pay a higher tax rate. Our Pro-concentration Motive Theorem states that optimal taxes increase the concentration of the industry, as measured by the Herfindahl index. Our Magnification Effect indicates that the variance of marginal costs is magnified by a factor which depends on the marginal cost of public funds. Copyright Springer-Verlag Berlin/Heidelberg 2005

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Bibliographic Info

Article provided by Springer in its journal Economic Theory.

Volume (Year): 25 (2005)
Issue (Month): 2 (02)
Pages: 421-454

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Handle: RePEc:spr:joecth:v:25:y:2005:i:2:p:421-454

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Related research

Keywords: Pollution; Environmental regulation; Oligopoly.;

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References

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  1. Gaudet, Gerard & Salant, Stephen W, 1991. "Uniqueness of Cournot Equilibrium: New Results from Old Methods," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 399-404, April.
  2. Van Long, N. & Soubeyran, A., 1996. "Cost Heterogeneity, Industry Concentration and Startegic Trade Policies," G.R.E.Q.A.M. 96a39, Universite Aix-Marseille III.
  3. Conrad Klaus, 1993. "Taxes and Subsidies for Pollution-Intensive Industries as Trade Policy," Journal of Environmental Economics and Management, Elsevier, vol. 25(2), pages 121-135, September.
  4. Ngo Van Long & Antoine Soubeyran, 1999. "Existence and Uniqueness of Cournot Equilibrium: A Contraction Mapping Approach," CIRANO Working Papers 99s-22, CIRANO.
  5. Browning, Edgar K, 1976. "The Marginal Cost of Public Funds," Journal of Political Economy, University of Chicago Press, vol. 84(2), pages 283-98, April.
  6. Long, N.V. & Soubeyran, A., 1998. "Cost Manipulation in Oligopoly: A Duality Approach," G.R.E.Q.A.M. 98a22, Universite Aix-Marseille III.
  7. Long, Ngo Van & Soubeyran, Antoine, 2001. "Cost Manipulation Games in Oligopoly, with Costs of Manipulating," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(2), pages 505-33, May.
  8. Hansson, Ingemar & Stuart, Charles, 1985. "Tax revenue and the marginal cost of public funds in Sweden," Journal of Public Economics, Elsevier, vol. 27(3), pages 331-353, August.
  9. Buchanan, James M, 1969. "External Diseconomies, Corrective Taxes, and Market Structure," American Economic Review, American Economic Association, vol. 59(1), pages 174-77, March.
  10. Rauscher, Michael, 1997. "International Trade, Factor Movements, and the Environment," OUP Catalogue, Oxford University Press, number 9780198290506.
  11. J. Neary, 2006. "International Trade and the Environment: Theoretical and Policy Linkages," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 33(1), pages 95-118, 01.
  12. Hoel, Michael, 1993. "Intertemporal properties of an international carbon tax," Resource and Energy Economics, Elsevier, vol. 15(1), pages 51-70, March.
  13. Ngo Van Long & Antoine Soubeyran, 2001. "Emission Taxes and Standards for an Asymmetric Oligopoly," CIRANO Working Papers 2001s-07, CIRANO.
  14. Benchekroun, Hassan & van Long, Ngo, 1998. "Efficiency inducing taxation for polluting oligopolists," Journal of Public Economics, Elsevier, vol. 70(2), pages 325-342, November.
  15. Van Long, N. & Soubeyran, A., 1997. "Cost Manipulation in an Asymmetric Oligopoly: The Taxation Problem," ASSET - Instituto De Economia Publica 173, ASSET (Association of Southern European Economic Theorists).
  16. Nathalie de Marcellis-Warin & Erwann Michel-Kerjan, 2001. "The Public-Private Sector Risk-Sharing in the French Insurance "Cat. Nat. System"," CIRANO Working Papers 2001s-60, CIRANO.
  17. Greg Shaffer & Stephen W. Salant, 1999. "Unequal Treatment of Identical Agents in Cournot Equilibrium," American Economic Review, American Economic Association, vol. 89(3), pages 585-604, June.
  18. Ulph, Alistair, 1996. "Environmental Policy and International Trade when Governments and Producers Act Strategically," Journal of Environmental Economics and Management, Elsevier, vol. 30(3), pages 265-281, May.
  19. Collie, David, 1993. "Strategic trade policy under asymmetric oligopoly," European Journal of Political Economy, Elsevier, vol. 9(2), pages 275-280, May.
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Citations

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Cited by:
  1. Hassan Benchekroun & Ngo Van Long, 2008. "A Class Of Performance-Based Subsidy Rules," The Japanese Economic Review, Japanese Economic Association, vol. 59(4), pages 381-400.
  2. Rabah Amir & Niels Nannerup, 2005. "Asymmetric Regulation of Identical Polluters in Oligopoly Models," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 30(1), pages 35-48, January.
  3. George E. Halkos & George J. Papageorgiou, 2012. "Pollution Control Policy: A Dynamic Taxation Scheme," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 6(1), pages 14-37, March.
  4. Requate, Till, 2005. "Environmental Policy under Imperfect Competition : A Survey," Economics Working Papers 2005,12, Christian-Albrechts-University of Kiel, Department of Economics.
  5. Antelo, Manel & Loureiro, Maria L., 2009. "Asymmetric information, signaling and environmental taxes in oligopoly," Ecological Economics, Elsevier, vol. 68(5), pages 1430-1440, March.
  6. Rupayan Pal & Bibhas Saha, 2010. "Does partial privatization improve the environment," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2010-018, Indira Gandhi Institute of Development Research, Mumbai, India.
  7. Naoto Jinji, 2013. "Comparative Statics for Oligopoly: A Generalized Result," Discussion papers e-12-011, Graduate School of Economics Project Center, Kyoto University.
  8. Rupayan Pal, 2009. "Delegation and emission tax in a differentiated oligopoly," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2009-007, Indira Gandhi Institute of Development Research, Mumbai, India.
  9. Meredith Fowlie, 2008. "Incomplete Environmental Regulation, Imperfect Competition, and Emissions Leakage," NBER Working Papers 14421, National Bureau of Economic Research, Inc.
  10. Rupayan Pal, 2009. "Delegation and Emission Tax in a Differentiated Oligopoly," Working Papers id:2263, eSocialSciences.
  11. Lapan, Harvey E. & Hennessy, David A., 2008. "Statistical moments analysis of production and welfare in multi-product Cournot oligopoly," International Journal of Industrial Organization, Elsevier, vol. 26(2), pages 598-606, March.
  12. Rupayan Pal & Bibhas Saha, 2010. "Does Partial Privatization Improve the Environment?," Working Papers id:3122, eSocialSciences.

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