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Market competition and abatement technology diffusion under environmental liability law

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  • Li, Yi

Abstract

One challenge in environmental liability law is to apportion the liability appropriately among multiple parties, when these multiple parties generate a single and non-separable damage. This paper provides a method of designing efficient apportionment rule in the presence of product market competition. In particular, I examine the role of apportionment rule in inducing abatement technology diffusion between competing firms. I show that such diffusion can be induced by an efficient apportionment rule. And this apportionment rule allocates a relatively large (more than 1/2) portion of the liability to the firm which originally owns the abatement technology. Furthermore, allocating the liability equally between the firms cannot induce diffusion.

Suggested Citation

  • Li, Yi, 2014. "Market competition and abatement technology diffusion under environmental liability law," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 168573, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea14:168573
    DOI: 10.22004/ag.econ.168573
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    References listed on IDEAS

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    1. Jaffe Adam B. & Stavins Robert N., 1995. "Dynamic Incentives of Environmental Regulations: The Effects of Alternative Policy Instruments on Technology Diffusion," Journal of Environmental Economics and Management, Elsevier, vol. 29(3), pages 43-63, November.
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