Roy Chowdhury, Indrani () (National Institute of Public Finance and Policy)
Abstract
We examine the impact of abatement taxes on the pollution level in a duopoly framework with endogenous market structure. We demonstrate that an increase in abatement taxes could trigger a regime-switch from joint ventures to Cournot competition, causing the pollution level to increase. Moreover, abatement taxes can implement the first best outcome if and only if the industry is not too polluting. In case it is, the second best level of taxes may or may not equal the optimal tax under either joint venture, or Cournot competition.
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Publisher Info
Paper provided by National Institute of Public Finance and Policy in its series Working Papers with number
05/31.
Find related papers by JEL classification: H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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