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Dynamic environmental taxes in an international duopoly

  • Shuichi Ohori

    ()

    (Institute of Economic Research, Kyoto University)

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    This paper studies a dynamic game of environmental taxes between two countries in a Cournot duopoly. Based on the assumption of linear demand functions, we demonstrate that the environmental tax in the steady-state equilibrium is lower in a dynamic environmental tax game than in a static environmental one. Therefore, the dynamic behavior of the governments results in an increase in the environmental damage. Further, as a result of international cooperation on environmental taxes between two countries in the first period, there is an increase in the optimal environmental tax; this is due to the decrease in the effect of the rent-shifting.

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    File URL: http://www.kier.kyoto-u.ac.jp/DP/DP628.pdf
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    Paper provided by Kyoto University, Institute of Economic Research in its series KIER Working Papers with number 628.

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    Length: 13pages
    Date of creation: Jan 2007
    Date of revision:
    Handle: RePEc:kyo:wpaper:628
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    1. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, vol. 18(1-2), pages 83-100, February.
    2. Moledina, Amyaz A. & Coggins, Jay S. & Polasky, Stephen & Costello, Christopher, 2003. "Dynamic environmental policy with strategic firms: prices versus quantities," Journal of Environmental Economics and Management, Elsevier, vol. 45(2, Supple), pages 356-376, March.
    3. Nannerup, Niels, 2001. "Equilibrium pollution taxes in a two industry open economy," European Economic Review, Elsevier, vol. 45(3), pages 519-532, March.
    4. Tanaka, Yasuhito, 1994. "Export subsidies under dynamic duopoly," European Economic Review, Elsevier, vol. 38(5), pages 1139-1151, May.
    5. Benford, Frank A., 1998. "On the Dynamics of the Regulation of Pollution: Incentive Compatible Regulation of a Persistent Pollutant," Journal of Environmental Economics and Management, Elsevier, vol. 36(1), pages 1-25, July.
    6. Shuichi Ohori, 2006. "Optimal Environmental Tax and Level of Privatization in an International Duopoly," Journal of Regulatory Economics, Springer, vol. 29(2), pages 225-233, 03.
    7. Conrad Klaus, 1993. "Taxes and Subsidies for Pollution-Intensive Industries as Trade Policy," Journal of Environmental Economics and Management, Elsevier, vol. 25(2), pages 121-135, September.
    8. Walz, Uwe & Wellisch, Dietmar, 1997. "Is free trade in the interest of exporting countries when there is ecological dumping?," Journal of Public Economics, Elsevier, vol. 66(2), pages 275-291, November.
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