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Emission standards vs. taxes: The case of asymmetric Cournot duopoly and uncertain control costs

  • Clemens Heuson

It is well known that uncertainty concerning firms’ costs as well as market power of the latter have to be taken into account in order to design and choose environmental policy instruments in an optimal way. As a matter of fact, in the most actual regulation settings the policy maker has to face both of these complications simultaneously. However, hitherto environmental economic theory has restricted itself to either of them when submitting conventional policy instruments to a comparative analysis. The article at hand accounts for closing this gap by investigating the welfare effects of emission standards and taxes against the background of uncertain emission control costs and a polluting asymmetric Cournot duopoly.

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File URL: http://www.bgpe.de/texte/DP/045_heuson.pdf
File Function: First version, 2008
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Paper provided by Bavarian Graduate Program in Economics (BGPE) in its series Working Papers with number 045.

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Length: 27 pages
Date of creation: Mar 2008
Date of revision:
Handle: RePEc:bav:wpaper:045_heuson
Contact details of provider: Web page: http://www.bgpe.de/

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  1. Martin L. Weitzman, 1978. "Reply to "Prices vs. Quantities: A Critical Note on the Use of Approximations" by James M. Malcomson," Review of Economic Studies, Oxford University Press, vol. 45(1), pages 209-210.
  2. R. Simpson, 1995. "Optimal pollution taxation in a Cournot duopoly," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 6(4), pages 359-369, December.
  3. Barnett, A H, 1980. "The Pigouvian Tax Rule under Monopoly," American Economic Review, American Economic Association, vol. 70(5), pages 1037-41, December.
  4. Martin L. Weitzman, 1974. "Prices vs. Quantities," Review of Economic Studies, Oxford University Press, vol. 41(4), pages 477-491.
  5. James M. Malcomson, 1978. "Prices vs. Quantities: A Critical Note on the Use of Approximations," Review of Economic Studies, Oxford University Press, vol. 45(1), pages 203-207.
  6. Clemens Heuson, 2008. "Weitzman revisited: Emission standards vs. taxes with uncertain control costs and market power of polluting firms," Discussion Paper Series 299, Universitaet Augsburg, Institute for Economics.
  7. Adar, Zvi & Griffin, James M., 1976. "Uncertainty and the choice of pollution control instruments," Journal of Environmental Economics and Management, Elsevier, vol. 3(3), pages 178-188, October.
  8. Helfand, Gloria E, 1991. "Standards versus Standards: The Effects of Different Pollution Restrictions," American Economic Review, American Economic Association, vol. 81(3), pages 622-34, June.
  9. Peter Tisato, 1994. "Pollution standards vs charges under uncertainty," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 4(3), pages 295-304, June.
  10. Buchanan, James M, 1969. "External Diseconomies, Corrective Taxes, and Market Structure," American Economic Review, American Economic Association, vol. 59(1), pages 174-77, March.
  11. Till Requate, 1993. "Pollution control in a Cournot duopoly via taxes or permits," Journal of Economics, Springer, vol. 58(3), pages 255-291, October.
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