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Environmental taxes and industry monopolization

  • Lambert Schoonbeek

    ()

  • Frans Vries

    ()

This paper considers a market with an incumbent monopolistic firm and a potential entrant. Production by both firms causes polluting emissions. The government selects a tax per unit emission by maximizing social welfare. The size of the tax rate affects whether or not the potential entrant enters the market. We identify the conditions that create a market structure where the preferences of the government and the incumbent firm coincide. Interestingly, there are cases where both the government and incumbent firm prefer a monopoly. Hence, the government might induce profitable monopolization by using a socially optimal tax policy instrument.

(This abstract was borrowed from another version of this item.)

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File URL: http://hdl.handle.net/10.1007/s11149-009-9093-4
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Article provided by Springer in its journal Journal of Regulatory Economics.

Volume (Year): 36 (2009)
Issue (Month): 1 (August)
Pages: 94-106

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Handle: RePEc:kap:regeco:v:36:y:2009:i:1:p:94-106
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  1. Mark Pearson, 1995. "The political economy of implementing environmental taxes," International Tax and Public Finance, Springer, vol. 2(2), pages 357-373, August.
  2. Helland, Eric & Matsuno, Mayumi, 2003. "Pollution Abatement as a Barrier to Entry," Journal of Regulatory Economics, Springer, vol. 24(2), pages 243-59, September.
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  4. Katsoulacos, Yannis & Xepapadeas, Anastasios, 1995. " Environmental Policy under Oligopoly with Endogenous Market Structure," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(3), pages 411-20, September.
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  7. R. Simpson, 1995. "Optimal pollution taxation in a Cournot duopoly," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 6(4), pages 359-369, December.
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  13. 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.
  14. Dewees, Donald N, 1983. "Instrument Choice in Environmental Policy," Economic Inquiry, Western Economic Association International, vol. 21(1), pages 53-71, January.
  15. Barnett, A H, 1980. "The Pigouvian Tax Rule under Monopoly," American Economic Review, American Economic Association, vol. 70(5), pages 1037-41, December.
  16. José Moraga-González & Noemi Padrón-Fumero, 2002. "Environmental Policy in a Green Market," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 22(3), pages 419-447, July.
  17. Shaffer, Sherrill, 1995. "Optimal Linear Taxation of Polluting Oligopolists," Journal of Regulatory Economics, Springer, vol. 7(1), pages 85-100, January.
  18. Puller, Steven L., 2006. "The strategic use of innovation to influence regulatory standards," Journal of Environmental Economics and Management, Elsevier, vol. 52(3), pages 690-706, November.
  19. Lee, Dwight R., 1975. "Efficiency of pollution taxation and market structure," Journal of Environmental Economics and Management, Elsevier, vol. 2(1), pages 69-72, September.
  20. Sherrill Shaffer, 2001. "Structural regulation of polluting oligopoly," Atlantic Economic Journal, International Atlantic Economic Society, vol. 29(1), pages 117-117, March.
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