To Commit or Not to Commit: Environmental Policy In Imperfectly Competitive Markets
AbstractThis paper investigates the effect of the government’s ability to commit, or not, to a specific level of environmental policy instrument, or environmental innovation and welfare in imperfectly competitive markets. We that under monopoly if the government is unable to commit, and follows thus a time consistent policy, then in general emission taxes are lower, while environmental innovation, profits and welfare are higher relative to the precommitment case. The monopoly results extend to the small numbers oligopoly, but they are reserved for the last numbers oligopoly case. Thus of the sufficiently large numbers of firms, emission taxes can be lower and innovation efforts and welfare can be higher under government commitment. The two policy regimes converge, regarding emission taxes, abetment effort and welfare, when the numbers of firms tends to infinity. Our findings indicate that, contrary to most of the results obtained previously, welfare gains can be achieve by either policy regime- precommitment or time consistent-depending on the numbers of firms in the industry.
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Bibliographic InfoPaper provided by University of Crete, Department of Economics in its series Working Papers with number 0110.
Length: 69 pages
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Emision Tax; Apatement effort; Time Consistent Policies; Precommitment; Monopoly; Oligopoly;
Find related papers by JEL classification:
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
- Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
- Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-11-18 (All new papers)
- NEP-ENV-2006-11-18 (Environmental Economics)
- NEP-MIC-2006-11-18 (Microeconomics)
- NEP-RES-2006-11-18 (Resource Economics)
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- Fischer, Carolyn, 2003. "Output-Based Allocation of Environmental Policy Revenues and Imperfect Competition," Discussion Papers dp-02-60, Resources For the Future.
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