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Delegation and emission tax in a differentiated oligopoly

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  • Rupayan Pal

    ()
    (Indira Gandhi Institute of Development Research)

Abstract

This paper examines how product differentiation as well as strategic managerial delegation affects optimal emission tax rate, environmental damage and social welfare, under alternative modes of product market competition. It shows that, under pure profit maximization, the (positive) optimal emission tax rate is not necessarily decreasing in degree of product differentiation, irrespective of the mode of competition. The possibility of emission tax rate to be positive and lower for more differentiated products, under quantity (price) competition, is higher (lower) in case of delegation than that in case of no delegation. It also shows that, under quantity (price) competition, the equilibrium emission tax rate environmental damage and social welfare are higher (lower) in case of delegation than that in case of no delegation.

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Bibliographic Info

Paper provided by Indira Gandhi Institute of Development Research, Mumbai, India in its series Indira Gandhi Institute of Development Research, Mumbai Working Papers with number 2009-007.

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Length: 25 pages
Date of creation: Oct 2009
Date of revision:
Handle: RePEc:ind:igiwpp:2009-007

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Keywords: Emission tax; price competition; product differentiation; quantity competition; strategic managerial delegation;

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Cited by:
  1. Ouchida, Yasunori & Goto, Daisaku, 2014. "Do emission subsidies reduce emission? In the context of environmental R&D organization," Economic Modelling, Elsevier, vol. 36(C), pages 511-516.
  2. Trishita Bhattacharjee & Rupayan Pal, 2013. "Managerial delegation in monopoly under network effects," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2013-009, Indira Gandhi Institute of Development Research, Mumbai, India.

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