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Environmental regulation and mergers within the eco-industry


  • Joan Canton
  • Maia David
  • Bernard Sinclair-Desgagné


The welfare implications of a merger in an environment industry (i.e. the industry that supplies abatement goods and services) are considered in a Cournot-Nash context. The traditional analysis of mergers is extended in two ways. First, we examine how the environmental policy may affect the incentives to merge in this specific sector. Second, we show that mergers in the environment industry impact welfare beyond what is observed in other sectors due to an extra effect on the environment. This could result in a conflict between an anti-trust agency, whose mandate is to focus on consumers' and firms' surplus, and a benevolent regulator considering the overall welfare.

Suggested Citation

  • Joan Canton & Maia David & Bernard Sinclair-Desgagné, 2007. "Environmental regulation and mergers within the eco-industry," Working Papers 2007/01, INRA, Economie Publique.
  • Handle: RePEc:apu:wpaper:2007/01

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    References listed on IDEAS

    1. Farrell, Joseph & Shapiro, Carl, 1990. "Horizontal Mergers: An Equilibrium Analysis," American Economic Review, American Economic Association, vol. 80(1), pages 107-126, March.
    2. Eberhard Feess & Gerd Muehlheusser, 2002. "Strategic Environmental Policy, Clean Technologies and the Learning Curve," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 23(2), pages 149-166, October.
    3. Khemani, R S & Shapiro, Daniel M, 1993. "An Empirical Analysis of Canadian Merger Policy," Journal of Industrial Economics, Wiley Blackwell, vol. 41(2), pages 161-177, June.
    4. Maia David & Bernard Sinclair-Desgagné, 2005. "Environmental Regulation and the Eco-Industry," Journal of Regulatory Economics, Springer, vol. 28(2), pages 141-155, September.
    5. Marie-Laure Allain & Saïd Souam, 2004. "Concentration horizontale et relations verticales," Working Papers hal-00242914, HAL.
    6. Hennessy, David A. & Roosen, Jutta, 1999. "Stochastic Pollution, Permits, and Merger Incentives," Journal of Environmental Economics and Management, Elsevier, vol. 37(3), pages 211-232, May.
    7. Alain-Désiré Nimubona & Bernard Sinclair-Desgagné, 2013. "The Pigouvian Tax Rule in the Presence of an Eco-Industry," Economics Bulletin, AccessEcon, vol. 33(1), pages 747-752.
    8. Stephen W. Salant & Sheldon Switzer & Robert J. Reynolds, 1983. "Losses From Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, Oxford University Press, vol. 98(2), pages 185-199.
    9. Joan Canton, 2007. "Environmental Taxation and International Eco-Industries," Working Papers 2007.26, Fondazione Eni Enrico Mattei.
    10. Bergman, Mats A. & Jakobsson, Maria & Razo, Carlos, 2005. "An econometric analysis of the European Commission's merger decisions," International Journal of Industrial Organization, Elsevier, vol. 23(9-10), pages 717-737, December.
    11. Till Requate, 2005. "Timing and Commitment of Environmental Policy, Adoption of New Technology, and Repercussions on R&D," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 31(2), pages 175-199, June.
    12. Perry, Martin K & Porter, Robert H, 1985. "Oligopoly and the Incentive for Horizontal Merger," American Economic Review, American Economic Association, vol. 75(1), pages 219-227, March.
    13. Joan Canton & Antoine Soubeyran & Hubert Stahn, 2008. "Environmental Taxation and Vertical Cournot Oligopolies: How Eco-industries Matter," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 40(3), pages 369-382, July.
    14. McAfee, R Preston & Williams, Michael A, 1992. "Horizontal Mergers and Antitrust Policy," Journal of Industrial Economics, Wiley Blackwell, vol. 40(2), pages 181-187, June.
    15. Steven Heubeck & Donald J. Smythe & Jingang Zhao, 2006. "A Note on the Welfare Effects of Horizontal Mergers in Asymmetric Linear Oligopolies," Annals of Economics and Finance, Society for AEF, vol. 7(1), pages 29-47, May.
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    More about this item


    Eco-industry; Environmental tax; Horizontal mergers;

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms


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