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Firms' Characteristic And Equilibrium With Tradeable Permits Market

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  • PIERRE-ANDRÉ JOUVET

Abstract

We study, in a simple model, the partial equilibrium of an industry with n firms endowed by different Cobb-Douglas technologies which have different pollution effects. The price of input (labour) and the demand curve to the industry are given. Pollution is restricted by a tradeable market of permits in the industry. Each firm is characterised by a parameter combining production efficiency and pollution effect, its e-characteristic. The equilibrium depends mainly on these e-characteristics which are linked to the performance of the technologies. In the long run performances are defined per unit of capital. Last, we analyse the consequences of permits' allocations on the profitability of the firms. Copyright 2007 The Authors Journal compilation 2007 Blackwell Publishing Ltd/University of Adelaide and Flinders University .

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  • Pierre-André Jouvet, 2007. "Firms' Characteristic And Equilibrium With Tradeable Permits Market ," Australian Economic Papers, Wiley Blackwell, vol. 46(2), pages 109-121, June.
  • Handle: RePEc:bla:ausecp:v:46:y:2007:i:2:p:109-121
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    1. Montgomery, W. David, 1972. "Markets in licenses and efficient pollution control programs," Journal of Economic Theory, Elsevier, vol. 5(3), pages 395-418, December.
    2. P-A. Jouvet & P. Michel & G. Rotillon, 2002. "Capital Allocation and International Equilibrium with Pollution Permits," THEMA Working Papers 2002-02, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
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