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Managerial Delegation Contracts, “Green” R&D and Emissions Taxation

Author

Listed:
  • Poyago-Theotoky Joanna

    (Department of Economics and Finance, La Trobe University, Melbourne, 3086Australia)

  • Yong Soo Keong

    (Xi'an Jiaotong-Liverpool University, International Business School Suzhou, Business Building, South Campus, 8 Chongwen Road, Suzhou Dushu Lake Science and Education Innovation District, Suzhou Industrial ParkSuzhou, China)

Abstract

We introduce an explicit environmental incentive into a managerial compensation contract in the context of a Cournot duopoly with pollution externalities under an emissions tax regime. We show that, depending on the effectiveness of “green” R&D, compared to a standard sales compensation contract, the explicit environmental focused contract results in more abatement. As a consequence, the regulator sets a lower emissions tax, and social welfare is higher. Moreover, in general, firm owners earn higher profits when adopting the environmental delegation contract.

Suggested Citation

  • Poyago-Theotoky Joanna & Yong Soo Keong, 2019. "Managerial Delegation Contracts, “Green” R&D and Emissions Taxation," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 19(2), pages 1-10, June.
    • Handle: RePEc:bpj:bejtec:v:19:y:2019:i:2:p:10:n:5
    DOI: 10.1515/bejte-2017-0128
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    References listed on IDEAS

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    Cited by:

    1. Lee, Sang-Ho & Park, Chul-Hi, 2020. "Environmental Regulations in Private and Mixed Duopolies: Emission Taxes versus Green R&D Subsidies," MPRA Paper 98833, University Library of Munich, Germany.
    2. Hirose, Kosuke & Matsumura, Toshihiro, 2022. "Green transformation in oligopoly markets under common ownership," MPRA Paper 115224, University Library of Munich, Germany.

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    More about this item

    Keywords

    “green” R&D; abatement; emissions tax; managerial delegation; cournot duopoly;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • M5 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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