IDEAS home Printed from https://ideas.repec.org/a/kap/enreec/v72y2019i3d10.1007_s10640-018-0220-5.html
   My bibliography  Save this article

The Signaling Effect of Emission Taxes Under International Duopoly

Author

Listed:
  • Akira Miyaoka

    (Kansai University)

Abstract

We analyze equilibrium emission taxes under international Cournot duopoly in the presence of asymmetric information between firms. When each firm does not know the production cost of its rival located in the other country, the government of each country can use its emission tax as a signal of the competitiveness of its domestic firm. We show that, owing to this signaling effect, the equilibrium emission tax and expected welfare of each country can be higher than those under symmetric information between firms or even higher than those obtained if the governments were to non-strategically set the tax rate equal to the (expected) marginal damage from pollution (i.e., the Pigouvian tax level). Our results suggest that the presence of asymmetric information between firms can mitigate a “race to the bottom” in strategic environmental policymaking.

Suggested Citation

  • Akira Miyaoka, 2019. "The Signaling Effect of Emission Taxes Under International Duopoly," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 72(3), pages 691-720, March.
    • Handle: RePEc:kap:enreec:v:72:y:2019:i:3:d:10.1007_s10640-018-0220-5
    DOI: 10.1007/s10640-018-0220-5
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10640-018-0220-5
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s10640-018-0220-5?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. Francesca Barigozzi & Bertrand Villeneuve, 2006. "The Signaling Effect of Tax Policy," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 8(4), pages 611-630, October.
    2. Daniel L. Millimet, 2003. "Assessing the Empirical Impact of Environmental Federalism," Journal of Regional Science, Wiley Blackwell, vol. 43(4), pages 711-733, November.
    3. Hamilton, Stephen F. & Requate, Till, 2004. "Vertical structure and strategic environmental trade policy," Journal of Environmental Economics and Management, Elsevier, vol. 47(2), pages 260-269, March.
    4. 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.
    5. Ana Espínola-Arredondo & Félix Muñoz-Garcia & Jude Bayham, 2014. "The Entry-Deterring Effects of Inflexible Regulation," Canadian Journal of Economics, Canadian Economics Association, vol. 47(1), pages 298-324, February.
    6. In-Koo Cho & David M. Kreps, 1987. "Signaling Games and Stable Equilibria," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 102(2), pages 179-221.
    7. Espínola-Arredondo, Ana & Muñoz-García, Félix, 2013. "When does environmental regulation facilitate entry-deterring practices," Journal of Environmental Economics and Management, Elsevier, vol. 65(1), pages 133-152.
    8. Caminal, Ramon, 1990. "A Dynamic Duopoly Model with Asymmetric Information," Journal of Industrial Economics, Wiley Blackwell, vol. 38(3), pages 315-333, March.
    9. Ulph, Alistair, 1996. "Environmental Policy and International Trade when Governments and Producers Act Strategically," Journal of Environmental Economics and Management, Elsevier, vol. 30(3), pages 265-281, May.
    10. Collie, David & Hviid, Morten, 1993. " Export Subsidies as Signals of Competitiveness," Scandinavian Journal of Economics, Wiley Blackwell, vol. 95(3), pages 327-339.
    11. John A. List & Shelby Gerking, 2000. "Regulatory Federalism and Environmental Protection in the United States," Journal of Regional Science, Wiley Blackwell, vol. 40(3), pages 453-471, August.
    12. Qui, Larry D., 1994. "Optimal strategic trade policy under asymmetric information," Journal of International Economics, Elsevier, vol. 36(3-4), pages 333-354, May.
    13. Fabio Antoniou & Phoebe Koundouri & Nikos Tsakiris, 2010. "Information Sharing and Environmental Policies," IJERPH, MDPI, vol. 7(10), pages 1-18, October.
    14. Andrew F. Daughety & Jennifer F. Reinganum, 2008. "Imperfect competition and quality signalling," RAND Journal of Economics, RAND Corporation, vol. 39(1), pages 163-183, March.
    15. Fredriksson, Per G. & Millimet, Daniel L., 2002. "Strategic Interaction and the Determination of Environmental Policy across U.S. States," Journal of Urban Economics, Elsevier, vol. 51(1), pages 101-122, January.
    16. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, vol. 18(1-2), pages 83-100, February.
    17. Fabio Antoniou & Panos Hatzipanayotou & Phoebe Koundouri, 2012. "Second Best Environmental Policies under Uncertainty," Southern Economic Journal, John Wiley & Sons, vol. 78(3), pages 1019-1040, January.
    18. Muñoz-Garcia Félix & Espinola-Arredondo Ana, 2015. "The Signaling Role of Subsidies," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 15(1), pages 1-22, January.
    19. repec:dau:papers:123456789/5402 is not listed on IDEAS
    20. George J. Mailath, 1989. "Simultaneous Signaling in an Oligopoly Model," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 104(2), pages 417-427.
    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. Keisuke Hattori, 2010. "Strategic Voting for Noncooperative Environmental Policies in Open Economies," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 46(4), pages 459-474, August.
    2. Dobrin R. Kolev & Thomas J. Prusa, 1997. "Tariff Policy for a Monopolist Under Incomplete Information," NBER Working Papers 6090, National Bureau of Economic Research, Inc.
    3. Haucap, Justus & Wey, Christian & Barmbold, Jens, 2000. "Location costs, product quality and implicit franchise contracts," Journal of International Economics, Elsevier, vol. 52(1), pages 69-87, October.
    4. Furusawa, Taiji & Higashida, Keisaku & Ishikawa, Jota, 2003. "What information is needed for welfare-enhancing policies under international oligopoly?," Japan and the World Economy, Elsevier, vol. 15(1), pages 31-46, January.
    5. Roelfsema, Hein, 2007. "Strategic delegation of environmental policy making," Journal of Environmental Economics and Management, Elsevier, vol. 53(2), pages 270-275, March.
    6. Kolev, Dobrin R. & Prusa, Thomas J., 1999. "Tariff policy for a monopolist in a signaling game," Journal of International Economics, Elsevier, vol. 49(1), pages 51-76, October.
    7. Sun, Ning & Yao, Hongxin, 2011. "Manipulable behavior in international trade," Economic Modelling, Elsevier, vol. 28(1-2), pages 60-66, January.
    8. Bouët, Antoine & Cassagnard, Patrice, 2013. "Strategic trade policy under asymmetric information with screening," Economic Modelling, Elsevier, vol. 32(C), pages 286-293.
    9. Levinson, Arik, 2003. "Environmental Regulatory Competition: A Status Report and Some New Evidence," National Tax Journal, National Tax Association;National Tax Journal, vol. 56(1), pages 91-106, March.
    10. Delia Ionascu & Kresimir zigic, 2005. "Free trade versus strategic trade as a choice between two 'second best' policies: A symmetric versus asymmetric information analysis," International Economic Journal, Taylor & Francis Journals, vol. 19(3), pages 417-446.
    11. Ana Espínola-Arredondo & Félix Muñoz-García, 2015. "Can Poorly Informed Regulators Hinder Competition?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 61(3), pages 433-461, July.
    12. Dermot Leahy & J. Peter Neary, 2013. "Oligopoly and Trade," Palgrave Macmillan Books, in: Daniel Bernhofen & Rod Falvey & David Greenaway & Udo Kreickemeier (ed.), Palgrave Handbook of International Trade, chapter 7, pages 197-235, Palgrave Macmillan.
    13. Mustafa Caglayan & Murat Usman, 2004. "Incompletely informed policymakers and trade policy in oligopolistic industries," Manchester School, University of Manchester, vol. 72(3), pages 283-297, June.
    14. Haiqing Hu & Di Chen & Chun‐Ping Chang & Yin Chu, 2021. "The Political Economy Of Environmental Consequences: A Review Of The Empirical Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 35(1), pages 250-306, February.
    15. Keshab BHATTARAI, 2008. "Bargaining, Coalitions, Signalling and Repeated Games for Economic Development and Poverty Alleviation," EcoMod2008 23800012, EcoMod.
    16. Bert Saveyn, 2013. "On NIMBY and commuting," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 20(2), pages 293-311, April.
    17. S. Lael Brainard & David Martimort, 1996. "Strategic Trade Policy Design with Asymmetric Information and Public Contracts," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 63(1), pages 81-105.
    18. Desai, Mihir A. & Hines Jr., James R., 2008. "Market reactions to export subsidies," Journal of International Economics, Elsevier, vol. 74(2), pages 459-474, March.
    19. Brander, James A., 1995. "Strategic trade policy," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 27, pages 1395-1455, Elsevier.
    20. Matloob Piracha, 2004. "Export Subsidies and Countervailing Duties Under Asymmetric Information," Studies in Economics 0410, School of Economics, University of Kent.

    More about this item

    Keywords

    Strategic environmental policy; Emission taxes; Signaling; Cournot duopoly; Race to the bottom;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F18 - International Economics - - Trade - - - Trade and Environment
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

    Statistics

    Access and download statistics

    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:kap:enreec:v:72:y:2019:i:3:d:10.1007_s10640-018-0220-5. See general information about how to correct material in RePEc.

    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: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.