Unilateral Emission Standards, Quality of Vertically Differentiated Products, and the Global Environment
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 producthf 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.
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|Date of revision:||Jul 2010|
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- José Moraga-González & Noemi Padrón-Fumero, 2002. "Environmental Policy in a Green Market," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 22(3), pages 419-447, July.
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