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Hold-up Problems with Respect to R&D Investment and Licensing in Environmental Regulation

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Author Info
Breitscheidel, Jörg
Abstract

We explore the design of self-financing tax-subsidy schemes to solve hold-up problems in environmental regulation. The announcement of the tax rate seems to be preferable to solve hold-up problems with respect to the investment in environmental R&D. In contrast, only the announcement of the subsidy rate is adequate to solve hold-up problems with respect to the licensing of environmentally friendly technologies. Altogether, the announcement of the subsidy rate yields higher expected social welfare than the announcement of the tax rate or the standard emission taxation if the marginal damage of emissions exceeds a certain level. --

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Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 05-86.

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Date of creation: 2005
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Handle: RePEc:zbw:zewdip:4569

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Related research
Keywords: Hold-up problems; Environmental regulation; Taxes and subsidies; Selffinancing mechanisms; Emission control;

Find related papers by JEL classification:
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
D62 - Microeconomics - - Welfare Economics - - - Externalities

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