IDEAS home Printed from https://ideas.repec.org/a/eee/ecmode/v55y2016icp73-82.html
   My bibliography  Save this article

Emission tax and optimal privatization in Cournot–Bertrand comparison

Author

Listed:
  • Xu, Lili
  • Cho, Sumi
  • Lee, Sang-Ho

Abstract

We compare a Cournot with a Bertrand duopoly in a differentiated mixed market when both emission tax and privatization policies are used together. We find that the optimal emission tax is always lower than the marginal environmental damage, and it is always lower under Cournot than under Bertrand. We also find that the optimal privatization is always a partial privatization, and it is always higher under Cournot than under Bertrand. The socially optimal combinations of emission tax and privatization will damage the environment most, but Cournot yields lower environmental damage and social welfare than those under Bertrand. Finally, we show that the environmental damage is non-monotone in the level of privatization under both Cournot and Bertrand competitions.

Suggested Citation

  • Xu, Lili & Cho, Sumi & Lee, Sang-Ho, 2016. "Emission tax and optimal privatization in Cournot–Bertrand comparison," Economic Modelling, Elsevier, vol. 55(C), pages 73-82.
  • Handle: RePEc:eee:ecmode:v:55:y:2016:i:c:p:73-82
    DOI: 10.1016/j.econmod.2016.02.008
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0264999316300190
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.econmod.2016.02.008?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Wang, Leonard F.S. & Wang, Jean, 2009. "Environmental taxes in a differentiated mixed duopoly," Economic Systems, Elsevier, vol. 33(4), pages 389-396, December.
    2. Scrimitore, Marcella, 2014. "Quantity competition vs. price competition under optimal subsidy in a mixed oligopoly," Economic Modelling, Elsevier, vol. 42(C), pages 166-176.
    3. Lee, Sang-Ho, 1999. "Optimal Taxation for Polluting Oligopolists with Endogenous Market Structure," Journal of Regulatory Economics, Springer, vol. 15(3), pages 293-308, May.
    4. Nakamura, Yasuhiko, 2015. "Price versus quantity in a mixed duopoly: The case of relative profit maximization," Economic Modelling, Elsevier, vol. 44(C), pages 37-43.
    5. Levin, Dan, 1985. "Taxation within Cournot oligopoly," Journal of Public Economics, Elsevier, vol. 27(3), pages 281-290, August.
    6. Maia David & Bernard Sinclair-Desgagné, 2005. "Environmental Regulation and the Eco-Industry," Journal of Regulatory Economics, Springer, vol. 28(2), pages 141-155, September.
    7. Fan, Joseph P.H. & Wong, T.J. & Zhang, Tianyu, 2007. "Politically connected CEOs, corporate governance, and Post-IPO performance of China's newly partially privatized firms," Journal of Financial Economics, Elsevier, vol. 84(2), pages 330-357, May.
    8. Sang-Ho Lee, 1998. "R&D Spillovers, Technology Cartel, and Monopoly Regulation," International Economic Journal, Taylor & Francis Journals, vol. 12(3), pages 77-88.
    9. Haraguchi, Junichi & Matsumura, Toshihiro, 2014. "Price versus quantity in a mixed duopoly with foreign penetration," Research in Economics, Elsevier, vol. 68(4), pages 338-353.
    10. Avinash Dixit, 1979. "A Model of Duopoly Suggesting a Theory of Entry Barriers," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 20-32, Spring.
    11. Shuichi Ohori, 2006. "Optimal Environmental Tax and Level of Privatization in an International Duopoly," Journal of Regulatory Economics, Springer, vol. 29(2), pages 225-233, March.
    12. Nguyen, Xuan, 2014. "Monopolistic third-degree price discrimination under vertical product differentiation," Economics Letters, Elsevier, vol. 125(2), pages 153-155.
    13. Li, Changying & Ji, Xiaoming, 2010. "Innovation, licensing, and price vs. quantity competition," Economic Modelling, Elsevier, vol. 27(3), pages 746-754, May.
    14. repec:hit:hitjcm:v:56:y:2015:i:1:p:135-154 is not listed on IDEAS
    15. Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
    16. Juan Bárcena-Ruiz & María Garzón, 2006. "Mixed Oligopoly and Environmental Policy," Spanish Economic Review, Springer;Spanish Economic Association, vol. 8(2), pages 139-160, June.
    17. Toshihiro Matsumura & Makoto Okamura, 2015. "Competition and privatization policies revisited: the payoff interdependence approach," Journal of Economics, Springer, vol. 116(2), pages 137-150, October.
    18. Xu, Lili & Lee, Sang-Ho, 2015. "Strategic Privatization With Tariffs And Environmental Taxes In An International Mixed Duopoly," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 56(1), pages 135-154, June.
    19. Matsumura, Toshihiro, 1998. "Partial privatization in mixed duopoly," Journal of Public Economics, Elsevier, vol. 70(3), pages 473-483, December.
    20. Marcella Scrimitore, 2014. "Profitability under Commitment in Cournot and Bertrand Mixed Markets," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 170(4), pages 684-703, December.
    21. Alipranti, Maria & Milliou, Chrysovalantou & Petrakis, Emmanuel, 2014. "Price vs. quantity competition in a vertically related market," Economics Letters, Elsevier, vol. 124(1), pages 122-126.
    22. R. Simpson, 1995. "Optimal pollution taxation in a Cournot duopoly," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 6(4), pages 359-369, December.
    23. Leonard F. S. Wang & Ya-chin Wang & Lihong Zhao, 2009. "Privatization and the Environment in a Mixed Duopoly with Pollution Abatement," Economics Bulletin, AccessEcon, vol. 29(4), pages 3112-3119.
    24. Nandini Gupta, 2005. "Partial Privatization and Firm Performance," Journal of Finance, American Finance Association, vol. 60(2), pages 987-1015, April.
    25. Basak, Debasmita & Wang, Leonard F.S., 2016. "Endogenous choice of price or quantity contract and the implications of two-part-tariff in a vertical structure," Economics Letters, Elsevier, vol. 138(C), pages 53-56.
    26. Narjess Boubakri & Jean-Claude Cosset & Omrane Guedhami, 2008. "Privatisation in Developing Countries: Performance and Ownership Effects," Development Policy Review, Overseas Development Institute, vol. 26(3), pages 275-308, May.
    27. Shuichi Ohori, 2012. "Environmental Tax and Public Ownership in Vertically Related Markets," Journal of Industry, Competition and Trade, Springer, vol. 12(2), pages 169-176, June.
    28. Scrimitore, Marcella, 2013. "Price or quantity? The strategic choice of subsidized firms in a mixed duopoly," Economics Letters, Elsevier, vol. 118(2), pages 337-341.
    29. Pal, Rupayan & Saha, Bibhas, 2015. "Pollution tax, partial privatization and environment," Resource and Energy Economics, Elsevier, vol. 40(C), pages 19-35.
    30. repec:wly:soecon:v:81:2:y:2014:p:457-473 is not listed on IDEAS
    31. Arghya Ghosh & Manipushpak Mitra, 2014. "Reversal of Bertrand-Cournot Rankings in the Presence of Welfare Concerns," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 170(3), pages 496-519, September.
    32. Beladi, Hamid & Chao, Chi-Chur, 2006. "Does privatization improve the environment?," Economics Letters, Elsevier, vol. 93(3), pages 343-347, December.
    33. Ghosh, Arghya & Mitra, Manipushpak, 2010. "Comparing Bertrand and Cournot in mixed markets," Economics Letters, Elsevier, vol. 109(2), pages 72-74, November.
    34. Matsumura, Toshihiro & Ogawa, Akira, 2012. "Price versus quantity in a mixed duopoly," Economics Letters, Elsevier, vol. 116(2), pages 174-177.
    35. Sang-Ho Lee & Chul-Hi Park, 2011. "Environmental Regulations on Vertical Oligopolies with Eco-Industry," Korean Economic Review, Korean Economic Association, vol. 27, pages 311-327.
    36. Kazuhiko Kato, 2013. "Optimal degree of privatization and the environmental problem," Journal of Economics, Springer, vol. 110(2), pages 165-180, October.
    37. Rupayan Pal & Bibhas Saha, 2014. "Mixed Duopoly and Environment," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 16(1), pages 96-118, February.
    38. Bibhas Saha, 2009. "Mixed ownership in a mixed duopoly with differentiated products," Journal of Economics, Springer, vol. 98(1), pages 25-43, September.
    39. Nguyen, Xuan, 2015. "On the efficiency of private and state-owned enterprises in mixed markets," Economic Modelling, Elsevier, vol. 50(C), pages 130-137.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pal, Rupayan & Saha, Bibhas, 2015. "Pollution tax, partial privatization and environment," Resource and Energy Economics, Elsevier, vol. 40(C), pages 19-35.
    2. Xu, Lili & Chen, Yuyan & Lee, Sang-Ho, 2021. "Emission tax and strategic environmental corporate social responsibility in a Cournot–Bertrand comparison," MPRA Paper 108498, University Library of Munich, Germany.
    3. Xu, Lili & Fan, Xinying & Luan, Weixin, 2020. "Strategic corporate social responsibility of high-speed rail in China," China Economic Review, Elsevier, vol. 62(C).
    4. Kosuke Hirose & Toshihiro Matsumura, 2019. "Comparing welfare and profit in quantity and price competition within Stackelberg mixed duopolies," Journal of Economics, Springer, vol. 126(1), pages 75-93, January.
    5. Toshihiro Matsumura & Akira Ogawa, 2017. "Endogenous Timing in Mixed Duopolies With Externality," Australian Economic Papers, Wiley Blackwell, vol. 56(4), pages 304-327, December.
    6. Junichi Haraguchi & Toshihiro Matsumura, 2016. "Cournot–Bertrand comparison in a mixed oligopoly," Journal of Economics, Springer, vol. 117(2), pages 117-136, March.
    7. Luciano Fanti & Nicola Meccheri, 2015. "On the Cournot–Bertrand Profit Differential and the Structure of Unionisation in a Managerial Duopoly," Australian Economic Papers, Wiley Blackwell, vol. 54(4), pages 266-287, December.
    8. Toshihiro Matsumura & Akira Ogawa, 2016. "Corporate social responsibility and endogenous competition structure," Economics Bulletin, AccessEcon, vol. 36(4), pages 2117-2127.
    9. Ki‐Dong Lee & Sunghee Choi & Kangsik Choi, 2020. "Bertrand versus Cournot competition in a downstream mixed oligopoly with foreign ownership," Bulletin of Economic Research, Wiley Blackwell, vol. 72(2), pages 101-120, April.
    10. Haraguchi, Junichi & Matsumura, Toshihiro, 2018. "Government-leading welfare-improving collusion," International Review of Economics & Finance, Elsevier, vol. 56(C), pages 363-370.
    11. 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.
    12. Rupayan Pal & Bibhas Saha, 2010. "Does partial privatization improve the environment," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2010-018, Indira Gandhi Institute of Development Research, Mumbai, India.
    13. Fanti, Luciano & Buccella, Domenico, 2018. "Corporate social responsibility and the choice of price versus quantities," Japan and the World Economy, Elsevier, vol. 48(C), pages 71-78.
    14. Nguyen, Xuan, 2015. "On the efficiency of private and state-owned enterprises in mixed markets," Economic Modelling, Elsevier, vol. 50(C), pages 130-137.
    15. Lee, Sang-Ho & Nakamura, Tamotsu & Park, Chul-Hi, 2017. "Optimal Privatization Policy in a Mixed Eco-Industry in the Presence of Commitments on Abatement Technologies," MPRA Paper 80902, University Library of Munich, Germany.
    16. Junichi Haraguchi & Toshihiro Matsumura, 2020. "Endogenous public and private leadership with diverging social and private marginal costs," Manchester School, University of Manchester, vol. 88(5), pages 699-730, September.
    17. Sang-Ho Lee & Lili Xu, 2018. "Endogenous timing in private and mixed duopolies with emission taxes," Journal of Economics, Springer, vol. 124(2), pages 175-201, June.
    18. Keita Yamane, 2018. "Mixed duopoly and the indirect effect in linear supply function competition," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 45(4), pages 519-532, December.
    19. Nakamura, Yasuhiko, 2019. "Combining the endogenous choice of the timing of setting incentive parameters and the contents of strategic contracts in a managerial mixed duopoly," International Review of Economics & Finance, Elsevier, vol. 59(C), pages 207-233.
    20. Yasuhiko Nakamura, 2019. "Combining the Endogenous Choice of the Timing of Setting the Levels of Strategic Contracts and Their Contents in a Managerial Mixed Duopoly," Journal of Industry, Competition and Trade, Springer, vol. 19(2), pages 235-261, June.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecmode:v:55:y:2016:i:c:p:73-82. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: http://www.elsevier.com/locate/inca/30411 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/30411 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.