Optimal emission tax with endogenous location choice of duopolistic firms
AbstractThis paper explores optimal environmental tax policy under which duopoly firms strategically choose the location of their plants in a simple three-stage game. We examine how the relationship between the optimal emission tax and the choice of location of duopoly firms affects the welfare of the home country. We characterize the relationship between the optimal emission tax and the fixed cost, depending on the degree of environmental damage from production. Finally, we show the existence of asymmetric equilibrium in which either firm chooses relocation of its plant even if the duopoly firms are identical ex ante.
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Bibliographic InfoPaper provided by Institute of Social and Economic Research, Osaka University in its series ISER Discussion Paper with number 0762.
Date of creation: Dec 2009
Date of revision:
Other versions of this item:
- Masako Ikefuji & Jun-ichi Itaya & Makoto Okamura, 2010. "Optimal Emission Tax with Endogenous Location Choice of Duopolistic Firms," Working Papers 2010.6, Fondazione Eni Enrico Mattei.
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-01-10 (All new papers)
- NEP-ENE-2010-01-10 (Energy Economics)
- NEP-ENV-2010-01-10 (Environmental Economics)
- NEP-PUB-2010-01-10 (Public Finance)
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