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Design standards and technology adoption: Welfare effects of increasing environmental fines when the number of firms is endogenous

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  • Baumann, Florian
  • Friehe, Tim

Abstract

This paper examines the consequences of an increase in the expected fine for non-compliance with an environmental design standard for an industry with Cournot competition and free entry. Our analysis is quite timely, given recent policy proposals to raise environmental fines. We describe the range in which changes in the environmental fine have no consequences, and detail the various other effects that emerge. It is established that an increase in the expected fine for non-compliance may have adverse welfare consequences, while it always serves the purpose of inducing a greater share of firms to adopt the prescribed technology.

Suggested Citation

  • Baumann, Florian & Friehe, Tim, 2013. "Design standards and technology adoption: Welfare effects of increasing environmental fines when the number of firms is endogenous," DICE Discussion Papers 106, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    • Handle: RePEc:zbw:dicedp:106
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    Cited by:

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    2. Friehe Tim & Mungan Murat C., 2020. "A Note on Productive and Dynamic Inefficiencies of Intermediate Regulatory Sanctions," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 20(1), pages 1-8, January.

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    More about this item

    Keywords

    pollution; regulation; design standard; endogenous number of firms; environmental fines; SEC;
    All these keywords.

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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