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Promotion of Eco-Products and Environmental Regulation with Learning-by-Doing

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Abstract

This paper studies a dynamic model of eco-product planning, where an eco-product supplied by a single producer is differentiated from a conventional product generating negative externalities, and the production technology of the eco-product is characterized by learning-by-doing. The result states that the learning effect causes the eco-product to be more promoted and brings about more favorable outcomes on social welfare. This study also examines how the environmental regulation on the conventional product, associated with a price distortion, affects the promotion of the eco-product, consumer surplus, the single producer's profit, and negative externalities. It is shown that the impact of the environmental regulation is similar to that of a rise in the learning effect. Furthermore, whether or not the environmental regulation should be adopted is highly dependent on the degree of the learning effect. In the presence of a large learning potential, the environmental regulation may not only promote the eco-product effectively but also improve social welfare through intensifying the learning effect.

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File URL: http://www.iuj.ac.jp/workingpapers/index.cfm?File=EMS_2006_07.pdf
File Function: First version, 2006
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Bibliographic Info

Paper provided by Research Institute, International University of Japan in its series Working Papers with number EMS_2006_07.

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Length: 41 pages
Date of creation: Mar 2006
Date of revision:
Handle: RePEc:iuj:wpaper:ems_2006_07

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Related research

Keywords: eco-product; environmental regulation; product differentiation; learning-by-doing; optimal control;

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References

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  1. Linda Argote & Sara L. Beckman & Dennis Epple, 1990. "The Persistence and Transfer of Learning in Industrial Settings," Management Science, INFORMS, vol. 36(2), pages 140-154, February.
  2. Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
  3. José Moraga-González & Noemi Padrón-Fumero, 2002. "Environmental Policy in a Green Market," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 22(3), pages 419-447, July.
  4. Miravete, Eugenio J, 2001. "Time-Consistent Protection with Learning by Doing," CEPR Discussion Papers 2937, C.E.P.R. Discussion Papers.
  5. CREMER, Helmuth & THISSE, Jacques-François, . "On the taxation of polluting products in a differentiated industry," CORE Discussion Papers RP -1384, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Drew Fudenberg & Jean Tirole, 1983. "Learning-by-Doing and Market Performance," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 522-530, Autumn.
  7. Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521311120, October.
  8. Yao, Dennis A., 1988. "Strategic responses to automobile emissions control: A game-theoretic analysis," Journal of Environmental Economics and Management, Elsevier, vol. 15(4), pages 419-438, December.
  9. Argote, L. & Epple, D., 1990. "Learning Curves In Manufacturing," GSIA Working Papers 89-90-02, Carnegie Mellon University, Tepper School of Business.
  10. C. Lanier Benkard, 2000. "Learning and Forgetting: The Dynamics of Aircraft Production," American Economic Review, American Economic Association, vol. 90(4), pages 1034-1054, September.
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  13. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  14. Bansal, Sangeeta & Gangopadhyay, Shubhashis, 2003. "Tax/subsidy policies in the presence of environmentally aware consumers," Journal of Environmental Economics and Management, Elsevier, vol. 45(2, Supple), pages 333-355, March.
  15. Stokey, Nancy L, 1988. "Learning by Doing and the Introduction of New Goods," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 701-17, August.
  16. A. M. Spence, 1981. "The Learning Curve and Competition," Bell Journal of Economics, The RAND Corporation, vol. 12(1), pages 49-70, Spring.
  17. Klaus Conrad, 2005. "Price Competition and Product Differentiation When Consumers Care for the Environment," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 31(1), pages 1-19, 05.
  18. Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521322249, October.
  19. Karen Palmer & Wallace E. Oates & Paul R. Portney, 1995. "Tightening Environmental Standards: The Benefit-Cost or the No-Cost Paradigm?," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 119-132, Fall.
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