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Environmental Standards under International Oligopoly

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  • Jota Ishikawa
  • Toshihiro Okubo

Abstract

We explore the effects of domestic environmental standards when a domestic firm and a foreign rival compete in the domestic market. We focus on a situation where the introduction of environmental standards forces the foreign product out of the domestic market because it does not meet the standards. Such prohibitive standards may induce the foreign firm to produce an environmentally friendly good through R&D or licensing obtained from the domestic firm. However, this does not guarantee that the product, which now complies with the environmental standards, will improve the environment. In the case of licensing, governments may intervene to shift the rent from the domestic firm. In certain circumstances, the shifted rent could exceed the amount paid by the foreign firm for licensing.

Suggested Citation

  • Jota Ishikawa & Toshihiro Okubo, 2010. "Environmental Standards under International Oligopoly," Global COE Hi-Stat Discussion Paper Series gd10-141, Institute of Economic Research, Hitotsubashi University.
    • Handle: RePEc:hst:ghsdps:gd10-141
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    File URL: http://gcoe.ier.hit-u.ac.jp/research/discussion/2008/pdf/gd10-141.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    environmental standards; international oligopoly; R&D; licensing; rent-shifting;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F18 - International Economics - - Trade - - - Trade and Environment

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