A Stochastic Optimal Control Model of Pollution Abatement
We model a dynamic monopoly with environmental externalities,investigating the adoption of a tax levied on the firm's instantaneous contribution to the accumulation of pollution. The latter process is subject to a shock, which is i.i.d. across instants. We prove the existence of an optimal tax rate such that the monopoly replicates the same steady state welfare level as under social planning. Yet, the corresponding output level, R&D investment for environmental friendly technologies and surplus distribution necessarily differ from the socially optimal ones.
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- Benchekroun, Hassan & van Long, Ngo, 1998.
"Efficiency inducing taxation for polluting oligopolists,"
Journal of Public Economics,
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- Davide Dragone & Luca Lambertini & Arsen Palestini, 2009.
"The Incentive to Invest in Environmental-Friendly Technologies: Dynamics Makes a Difference,"
Working Paper Series
21_09, The Rimini Centre for Economic Analysis.
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1992-12, University of Guelph, Department of Economics and Finance.
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- Paul Klemperer & Margaret Meyer, 1986. "Price Competition vs. Quantity Competition: The Role of Uncertainty," RAND Journal of Economics, The RAND Corporation, vol. 17(4), pages 618-638, Winter.
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