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The Porter Hypothesis and Hyperbolic Discounting

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  • Roy Chowdhury, Prabal

Abstract

We examine pollution-reducing R&D by a monopoly firm producing a dirty product. In a dynamic framework with hyperbolic discounting, we establish conditions under which the Porter hypothesis goes through, i.e. environmental regulation increases R&D, thus reducing pollution, as well as increasing firm profits. This is likely to hold whenever R&D costs are at an intermediate level, and the planning horizon of the firms is large.

Suggested Citation

  • Roy Chowdhury, Prabal, 2010. "The Porter Hypothesis and Hyperbolic Discounting," MPRA Paper 23647, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:23647
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    References listed on IDEAS

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    1. Matthew Rabin & Ted O'Donoghue, 1999. "Doing It Now or Later," American Economic Review, American Economic Association, vol. 89(1), pages 103-124, March.
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    Cited by:

    1. Jana Stoever & John P. Weche, 2018. "Environmental Regulation and Sustainable Competitiveness: Evaluating the Role of Firm-Level Green Investments in the Context of the Porter Hypothesis," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 70(2), pages 429-455, June.
    2. Stefan Ambec & Mark A. Cohen & Stewart Elgie & Paul Lanoie, 2013. "The Porter Hypothesis at 20: Can Environmental Regulation Enhance Innovation and Competitiveness?," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 7(1), pages 2-22, January.
    3. Indrani Roy Chowdhury & Sandwip K. Das, 2011. "Environmental regulation, green R&D and the Porter hypothesis," Indian Growth and Development Review, Emerald Group Publishing Limited, vol. 4(2), pages 142-152, September.
    4. Saidi Magaly Flores S nchez & Miguel Alejandro Flores Segovia & Luis Carlos Rodr guez L pez, 2020. "Impact of Public Policies on the Technological Innovation in the Renewable Energy Sector," International Journal of Energy Economics and Policy, Econjournals, vol. 10(2), pages 139-159.

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    More about this item

    Keywords

    Porter hypothesis; abatement tax; R&D; hyperbolic discounting;
    All these keywords.

    JEL classification:

    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly

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