Pollution Tax under Lobbying Duopolists
AbstractWe study a model which explains a politically determined pollution tax outcome under asymmetric duopoly. We assume an asymmetry of firms in the pollution emissions per unit of output. The polluting duopoly and three-stage political game are considered. We derive the equilibrium tax rate and show that it might excess the marginal external damages, even without an environmental group. The politically determined tax rate is decomposed to the marginal external damages, the imperfect competition effect, and the lobbying effect. Under linear demand and cost functions, we derive the condition that Pigouvian taxation is politically determined. The effect on the equilibrium tax of firm heterogeneity is discussed.
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Bibliographic InfoPaper provided by Kyushu Sangyo University, Faculty of Economics in its series Discussion Papers with number 22.
Length: 20 pages
Date of creation: Dec 2005
Date of revision:
Cournot duopoly; firm heterogeneity; lobbying activity; political economy; pollution tax;
Find related papers by JEL classification:
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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