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Environmental Regulation and Horizontal Mergers in the Eco-industry

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Author Info
Joan Canton (University of Ottawa)
Maia David (UMR INRA-AgroParisTech Economie publique)
Bernard Sinclair-Desgagné (HEC Montreal, CIRANO and Ecole Polytechniqu)

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Abstract

This paper considers the environmental policy and welfare implications of a merger between environment firms (i.e., firms managing environmental resources or supplying pollution abatement goods and services). The traditional analysis of mergers in Cournot oligopolies is extended in two ways. First, we show how environmental policy affects the incentives of environment firms to merge. Second, we stress that mergers in the eco-industry impact welfare beyond what is observed in other sectors, due to an extra effect on pollution abatement efforts; this might lead to disagreements between an anti-trust agency seeking to limit market concentration which can be detrimental to consumer surplus and a benevolent regulator who maximizes total welfare.

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Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2008.46.

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Date of creation: May 2008
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Handle: RePEc:fem:femwpa:2008.46

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Related research
Keywords: Eco-Industry; Environmental Policy; Horizontal Mergers;

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Find related papers by JEL classification:
D62 - Microeconomics - - Welfare Economics - - - Externalities
H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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References listed on IDEAS
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  1. Ramón Faulí-Oller, 1997. "-On Merger Profitability In A Cournot Setting," Working Papers. Serie AD 1997-03, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
  2. McAfee, R Preston & Williams, Michael A, 1992. "Horizontal Mergers and Antitrust Policy," Journal of Industrial Economics, Blackwell Publishing, vol. 40(2), pages 181-87, June. [Downloadable!] (restricted)
  3. Fauli-Oller, Ramon, 2002. "Mergers between Asymmetric Firms: Profitability and Welfare," Manchester School, University of Manchester, vol. 70(1), pages 77-87, January. [Downloadable!] (restricted)
  4. Salant, Stephen W & Switzer, Sheldon & Reynolds, Robert J, 1983. "Losses from Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 98(2), pages 185-99, May. [Downloadable!] (restricted)
  5. Maia David & Bernard Sinclair-Desgagné, 2005. "Environmental regulation and the eco-industry," Working Papers hal-00243019_v1, HAL. [Downloadable!]
    Other versions:
  6. Hennessy, David A. & Roosen, Jutta, 2000. "Stochastic Pollution, Permits, and Merger Incentives," Staff General Research Papers 1700, Iowa State University, Department of Economics.
    Other versions:
  7. Marie-Laure Allain & Saïd Souam, 2004. "Concentration horizontale et relations verticales," Working Papers hal-00242914_v1, HAL. [Downloadable!]
    Other versions:
  8. Eberhard Feess & Gerd Muehlheusser, 2002. "Strategic Environmental Policy, Clean Technologies and the Learning Curve," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 23(2), pages 149-166, October. [Downloadable!] (restricted)
  9. Khemani, R S & Shapiro, Daniel M, 1993. "An Empirical Analysis of Canadian Merger Policy," Journal of Industrial Economics, Blackwell Publishing, vol. 41(2), pages 161-77, June. [Downloadable!] (restricted)
  10. Till Requate, 2005. "Timing and Commitment of Environmental Policy, Adoption of New Technology, and Repercussions on R&D," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 31(2), pages 175-199, 06. [Downloadable!] (restricted)
  11. Bernard Sinclair-Desgagné & Alain-Désiré Nimubona, 2005. "The Pigouvian Tax Rule in the Presence of an Eco-Industry," Working Papers 2005.57, Fondazione Eni Enrico Mattei. [Downloadable!]
    Other versions:
  12. Perry, Martin K & Porter, Robert H, 1985. "Oligopoly and the Incentive for Horizontal Merger," American Economic Review, American Economic Association, vol. 75(1), pages 219-27, March. [Downloadable!] (restricted)
  13. Farrell, Joseph & Shapiro, Carl, 1990. "Horizontal Mergers: An Equilibrium Analysis," American Economic Review, American Economic Association, vol. 80(1), pages 107-26, March. [Downloadable!] (restricted)
    Other versions:
  14. Joan Canton, 2007. "Environmental Taxation and International Eco-Industries," Working Papers 2007.26, Fondazione Eni Enrico Mattei. [Downloadable!]
  15. Barnett, A H, 1980. "The Pigouvian Tax Rule under Monopoly," American Economic Review, American Economic Association, vol. 70(5), pages 1037-41, December. [Downloadable!] (restricted)
  16. Fauli-Oller, Ramon, 1997. "On merger profitability in a Cournot setting," Economics Letters, Elsevier, vol. 54(1), pages 75-79, January. [Downloadable!] (restricted)
  17. Joan Canton & Antoine Soubeyran & Hubert Stahn, 2008. "Environmental Taxation and Vertical Cournot Oligopolies: How Eco-industries Matter," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 40(3), pages 369-382, July. [Downloadable!] (restricted)
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