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Porter's Hypothesis on Environmental Policy in an Oligopoly Model with Cost Asymmetry Caused by Innovation / Porter's Hypothese zur Umweltpolitik in einem Oligopol mit asymmetrischen Kosten

Listed author(s):
  • Feess Eberhard

    ()

    (Fachbereich Wirtschaftswissenschaften (Departments of Economics), Johann Wolfgang Goethe-Universität Frankfurt/Main, Schumannstr. 34a, D-60325 Frankfurt, Germany)

  • Taistra Gregor

    ()

    (Kreditanstalt für Wiederaufbau, Palmengartenstr. 5 - 9 , D-60325 Frankfurt, Germany)

Registered author(s):

    Porter's hypothesis that a national leadership in environmental policy can increase the international competitiveness of domestic industries is analyzed in a two-period model with Cournot competition. It is assumed that an environmentally friendly technology leads to a decrease of unit costs in the second period. We demonstrate that a leadership can trigger the adoption of a green technology that increases the domestic firm‘s profits even if aggregated unit costs are higher, and if the firm does not innovate voluntarily. The optimal domestic policy, the timing of the foreign firm‘s innovation, and the effect of environmental policy on the firms‘ profits all depend on three factors: the probability that the policy is imitated, the difference in unit costs caused by the different technologies, and the significance of different unit costs depending on the inverse demand function.

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    File URL: https://www.degruyter.com/view/j/jbnst.2000.220.issue-1/jbnst-2000-0103/jbnst-2000-0103.xml?format=INT
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    Article provided by De Gruyter in its journal Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik).

    Volume (Year): 220 (2000)
    Issue (Month): 1 (February)
    Pages: 18-31

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    Handle: RePEc:jns:jbstat:v:220:y:2000:i:1:p:18-31
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    1. Brainard, S. Lael & Martimort, David, 1997. "Strategic trade policy with incompletely informed policymakers," Journal of International Economics, Elsevier, vol. 42(1-2), pages 33-65, February.
    2. Hoel, M., 1989. "Global Environmental Problems: The Effects Of Unilateral Actions Taken By One Country," Memorandum 11/1989, Oslo University, Department of Economics.
    3. Adam B. Jaffe et al., 1995. "Environmental Regulation and the Competitiveness of U.S. Manufacturing: What Does the Evidence Tell Us?," Journal of Economic Literature, American Economic Association, vol. 33(1), pages 132-163, March.
    4. Ulph, A. & Ulph, D., 1994. "Trade, strategic innovation and strategic environmental policy: a general analysis," Discussion Paper Series In Economics And Econometrics 9416, Economics Division, School of Social Sciences, University of Southampton.
    5. Carlo Carraro & Domenico Siniscalco, 1992. "Environmental innovation policy and international competition," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 2(2), pages 183-200, March.
    6. Ulph, Alistair Mitchell & Ulph, David, 1994. "Trade, Strategic Innovation and Strategic Environmental Policy - a General Analysis," CEPR Discussion Papers 1063, C.E.P.R. Discussion Papers.
    7. Dixit, Avinash K, 1986. "Comparative Statics for Oligopoly," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(1), pages 107-122, February.
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