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The switching effect of environmental taxation within Bertrand differentiated duopoly

  • Kurtyka, Oliwia
  • Mahenc, Philippe

We investigate second-best optimal taxation of the polluting variety of a product in a Bertrand duopoly with differentiated varieties. The analysis provides novel insight on a useful social function of environmental regulation. Besides internalizing the environmental externality, the taxation of the polluting variety improves the matching of consumers and product varieties, and so creates a socially desirable business switching between the differentiated varieties.

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Article provided by Elsevier in its journal Journal of Environmental Economics and Management.

Volume (Year): 62 (2011)
Issue (Month): 2 (September)
Pages: 267-277

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Handle: RePEc:eee:jeeman:v:62:y:2011:i:2:p:267-277
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622870

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  1. Buchanan, James M, 1969. "External Diseconomies, Corrective Taxes, and Market Structure," American Economic Review, American Economic Association, vol. 59(1), pages 174-77, March.
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