Under the assumption of imperfect competition in a durable good industry, the present paper investigates the efficient regulation of solid waste which causes environmental damage at the end of the product's life. It turns out that the second-best waste tax falls short of the marginal environmental damage if the producers rent their products but may also exceed the marginal damage if the producers sell their products. If in the sales case the industry is regulated with waste taxes and stock subsudies then the first-best tax-subsidy scheme also contains a waste tax which deviates from the marginal damage, in general. Under monopoly this tax unambiguously exceeds the marginal damage. Furthermore, the analysis provides a further reason why the Swan independence result generally doesn't hold in rental markets.
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Paper provided by Universität Siegen, Fachbereich Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht in its series Volkswirtschaftliche Diskussionsbeitraege with number
81-99.
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Find related papers by JEL classification: L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
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