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Relative tax in a vertically differentiated market: the key role of consumers in environment

Author

Listed:
  • G. Ceccantoni
  • O. Tarola
  • C. Vergari

Abstract

In this paper, under the assumption that green consumption has (at least partially) a social/psychological dimension, we analyse the effect of a carbon tax when it is imposed on consumers buying dirty products rather than on polluting firms. The amount of the tax paid is determined by the share of brown consumers in the market and the quality gap between variants. We show that this tax can abate emissions without inducing the undesirable relocation effect which can be observed in the case when a unilateral climate policy is imposed on polluting producers.

Suggested Citation

  • G. Ceccantoni & O. Tarola & C. Vergari, 2017. "Relative tax in a vertically differentiated market: the key role of consumers in environment," Working Papers wp2005, Dipartimento Scienze Economiche, Universita' di Bologna.
  • Handle: RePEc:bol:bodewp:wp2005
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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