The Porter Hypothesis and Hyperbolic Discounting
AbstractWe 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.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 23647.
Date of creation: 2010
Date of revision:
Porter hypothesis; abatement tax; R&D; hyperbolic discounting;
Other versions of this item:
- Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
- D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy-Making and Implementation
- D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-07-17 (All new papers)
- NEP-ENE-2010-07-17 (Energy Economics)
- NEP-ENV-2010-07-17 (Environmental Economics)
- NEP-INO-2010-07-17 (Innovation)
- NEP-REG-2010-07-17 (Regulation)
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