Asymmetric regulation of identical polluters in oligopoly models
AbstractStudies of second-b est environmental regulation ofiden tical polluting agents have invariably ignored potentially welfare-improving asymmetric regulation by imposing equal regulatory treatment of identical firms at the outset. Yet, cost asymmetry between oligopoly firms may well give rise to private as well as social gains. A trade-off is demonstrated for the regulator, between private costs savings and additional social costs when asymmetric treatment is allowed. Asymmetry is indeed optimal for a range of plausible parameter values. Further, it is demonstrated that for a broad class of abatement cost functions, there is scope for increasing welfare while keeping both total output and total emission constant. Some motivating policy issues are discussed in light ofthe results, including international harmonization and global carbon dioxide reduction.
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Bibliographic InfoPaper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2004046.
Date of creation: 00 Jun 2004
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asymmetric emissions regulation; polluting oligopolists; EU harmonization;
Other versions of this item:
- 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.
- Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
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