Self-financing Tax/Subsidy Mechanisms in Environmental Regulation with Many Firms
AbstractWe consider the application of self-financing tax/subsidy mechanisms in environmental regulation and explore the question whether these mechanisms yield strong investment incentives in a market with many firms under Cournot competition. It turns out that the tax/subsidy mechanism with the announcement of the subsidy rate and the tax/subsidy mechanism with the announcement of the tax rate work for an arbitrary number of firms, which means that they yield strong incentives for investing in environmentally friendly technologies. The announcement of the subsidy rate is preferable for solving hold-up problems. --
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Bibliographic InfoPaper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 05-87.
Date of creation: 2005
Date of revision:
Hold-up problems; Environmental regulation; Taxes and subsidies; Selffinancing mechanisms; Emission control;
Find related papers by JEL classification:
- 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
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
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