Product Variety, Scale Economies, and Environmental Taxes
We discuss how efficiently a unit tax deals with external damage problems when economies of scale characterize a monopolistically competitive market in which consumers' value product variety. It turns out that neither the number of varieties nor the quantity of each variety is at the optimum under a unit tax. Moreover, aggregate production costs are not minimized under a unit tax. For practical policy purposes, some results suggest that a Pigouvian tax can replace a tax taking into account monopoly. Our findings make this conclusion false when the number of firms is endogenous.
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Volume (Year): 9 (2009)
Issue (Month): 1 (May)
Pages: 1-18
| Handle: | RePEc:bpj:bejtec:v:9:y:2009:i:1:n:18 |
| Contact details of provider: | Web page: https://www.degruyter.com
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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Oates, Wallace E. & Strassmann, Diana L., 1984. "Effluent fees and market structure," Journal of Public Economics, Elsevier, vol. 24(1), pages 29-46, June.
- Michael Spence, 1976. "Product Selection, Fixed Costs, and Monopolistic Competition," Review of Economic Studies, Oxford University Press, vol. 43(2), pages 217-235.
- Allanson, Paul & Montagna, Catia, 2005.
"Multiproduct firms and market structure: An explorative application to the product life cycle,"
International Journal of Industrial Organization,
Elsevier, vol. 23(7-8), pages 587-597, September.
- Paul Allanson & Catia Montagna, 1999. "Multiproduct Firms and Market Structure: An Explorative Application to the Product Life Cycle," Dundee Discussion Papers in Economics 101, Economic Studies, University of Dundee.
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- Oliver D. Hart, 1985. "Monopolistic Competition in the Spirit of Chamberlin: A General Model," Review of Economic Studies, Oxford University Press, vol. 52(4), pages 529-546.
- Buchanan, James M, 1969. "External Diseconomies, Corrective Taxes, and Market Structure," American Economic Review, American Economic Association, vol. 59(1), pages 174-177, March.
- Barnett, A H, 1980. "The Pigouvian Tax Rule under Monopoly," American Economic Review, American Economic Association, vol. 70(5), pages 1037-1041, December.
- Dennis W. Carlton & Glenn C. Loury, 1980. "The Limitations of Pigouvian Taxes as a Long-Run Remedy for Externalities," The Quarterly Journal of Economics, Oxford University Press, vol. 95(3), pages 559-566.
- Spulber, Daniel F., 1985. "Effluent regulation and long-run optimality," Journal of Environmental Economics and Management, Elsevier, vol. 12(2), pages 103-116, June. Full references (including those not matched with items on IDEAS)
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