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Unilateral Emission Standards, Quality of Vertically Differentiated Products, and the Global Environment

Author

Listed:
  • Keisaku Higahsida

    (School of Economics, Kwansei Gakuin University)

  • Tsuyoshi Toshimitsu

    (School of Economics, Kwansei Gakuin University)

Abstract

Employing an environmentally-differentiated products model with heterogeneous consumers in terms of environmental consciousness, this paper examines the effect of a unilateral change in a home emission standard on the qualities of products, aggregate emissions, and welfare of both home and foreign countries. When firms compete with each other in a Cournot fashion, as the home emission standard becomes stricter, aggregate emissions of both domestic and foreign countries decrease, if a firm which produces a gdirtier product h f supplies the same product to both domestic and foreign markets. On the other hand, if the firm supplies different products in environmental features to different markets, a stricter emission standard by the home government increases aggregate emissions of the foreign country. Even in the Bertrand duopoly case, the effects of a stricter emission standard on both countries could be different from each other.

Suggested Citation

  • Keisaku Higahsida & Tsuyoshi Toshimitsu, 2010. "Unilateral Emission Standards, Quality of Vertically Differentiated Products, and the Global Environment," Discussion Paper Series 58, School of Economics, Kwansei Gakuin University, revised Jul 2010.
    • Handle: RePEc:kgu:wpaper:58
    as

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    References listed on IDEAS

    as
    1. José Moraga-González & Noemi Padrón-Fumero, 2002. "Environmental Policy in a Green Market," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 22(3), pages 419-447, July.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    emission standards; international duopoly; environmentally differentiated products;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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