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Asymmetric regulation of identical polluters in oligopoly models

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  • AMIR, Rabah
  • NANNERUP, Niels

Abstract

Studies of second-b est environmental regulation ofiden tical polluting agents have invariably ignored potentially welfare-improving asymmetric regulation by imposing equal regulatory treatment of identical firms at the outset. Yet, cost asymmetry between oligopoly firms may well give rise to private as well as social gains. A trade-off is demonstrated for the regulator, between private costs savings and additional social costs when asymmetric treatment is allowed. Asymmetry is indeed optimal for a range of plausible parameter values. Further, it is demonstrated that for a broad class of abatement cost functions, there is scope for increasing welfare while keeping both total output and total emission constant. Some motivating policy issues are discussed in light ofthe results, including international harmonization and global carbon dioxide reduction.

Suggested Citation

  • AMIR, Rabah & NANNERUP, Niels, 2004. "Asymmetric regulation of identical polluters in oligopoly models," LIDAM Discussion Papers CORE 2004046, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:2004046
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    References listed on IDEAS

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    5. Amir, R., 1996. "Cournot oligopoly and theory of supermodular games," LIDAM Reprints CORE 1228, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    6. Amir, Rabah, 1996. "Cournot Oligopoly and the Theory of Supermodular Games," Games and Economic Behavior, Elsevier, vol. 15(2), pages 132-148, August.
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    Cited by:

    1. Jay S. Coggins & Andrew L. Goodkind & Jason Nguyen & Zhiyu Wang, 2019. "Price Effects, Inefficient Environmental Policy, and Windfall Profits," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 72(3), pages 637-656, March.
    2. Guy Meunier, 2011. "Emission Permit Trading Between Imperfectly Competitive Product Markets," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 50(3), pages 347-364, November.
    3. Gerda Dewit & Dermot Leahy, 2015. "Tax Uniformity: A Commitment Device for Restraining Opportunistic Behavior," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(5), pages 641-672, October.
    4. Jihad C Elnaboulsi, 2015. "Environmental Regulation and Policy Design: The Impact of the Regulators Ecological Conscience on the Tax Setting Process," Working Papers hal-01377913, HAL.

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    More about this item

    Keywords

    asymmetric emissions regulation; polluting oligopolists; EU harmonization;
    All these keywords.

    JEL classification:

    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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