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Environmental Policy under Oligopoly with Endogenous Market Structure


  • Katsoulacos, Yannis
  • Xepapadeas, Anastasios


Emission taxes under both fixed-number oligopoly and endogenous market structure, which are the most relevant market structures for policy issues, are examined. In the latter case, and contrary to what is expected under imperfect competition, the optimal tax could exceed marginal external damages, which implies that externalities generated by oligopolistic firms could be optimally controlled by overinternalizing environmental damages. Under endogenous market structure, a scheme consisting of a license fee and a second-best underinternalizing emission tax can increase social welfare as compared to the use of a single emission tax exceeding marginal damages. Copyright 1995 by The editors of the Scandinavian Journal of Economics.

Suggested Citation

  • Katsoulacos, Yannis & Xepapadeas, Anastasios, 1995. " Environmental Policy under Oligopoly with Endogenous Market Structure," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(3), pages 411-420, September.
  • Handle: RePEc:bla:scandj:v:97:y:1995:i:3:p:411-20

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    References listed on IDEAS

    1. Luc Aucremanne & Emmanuel Dhyne, 2004. "How frequently do prices change? Evidence based on the micro data underlying the Belgian CPI," Working Paper Research 44, National Bank of Belgium.
    2. Aucremanne, Luc & Dhyne, Emmanuel, 2004. "How frequently do prices change? Evidence based on the micro data underlying the Belgian CPI," Working Paper Series 331, European Central Bank.
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    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation


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