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Environmental Policy, Mergers and Environmental R&D with Spillovers

Author

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  • Chenyu Wang

    (School of Economics and Trade, Hunan University, Changsha 410079, China)

Abstract

This project lies at the frontier between environmental economics and industrial organization. We use a duopoly setting of a three-stage game; in the first stage, the government chooses an emission tax and aims for maximizing welfare; in the second stage, firms use R&D to reduce their emissions; in the last stage, firms compete a la Cournot with differentiated products. We focus on two policy regimes and three scenarios, namely regimes of competition and merger and scenarios of commitment, non-commitment, and exogenous tax. The study focuses on two major questions: (1) what is the effect of merger on R&D, and the effect of commitment on R&D? (2)what is the effect of merger and commitment on the economy? Results are obtained through numerical simulations of the model. We find that: (i) Merger has a positive effect on R&D under non-commitment and the exogenous tax scenarios. (ii) Under commitment, if goods are imperfect substitutes or homogenous, merger has a negative effect on R&D; if goods are complements or independent, merger has a positive effect on R&D. (iii) For any types of goods under any regime, commitment has a negative effect on R&D.

Suggested Citation

  • Chenyu Wang, 2020. "Environmental Policy, Mergers and Environmental R&D with Spillovers," Revista Economía, Fondo Editorial - Pontificia Universidad Católica del Perú, vol. 43(86), pages 1-38.
  • Handle: RePEc:pcp:pucrev:y:2020:i:86:p:1-38
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    More about this item

    Keywords

    Environmental Economics; Industrial Organization; Environmental R&D; Environmental Modelling;
    All these keywords.

    JEL classification:

    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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