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Pollution Tax and Social Welfare in Oligopoly: Asymmetric Taxation on Identical Polluters

Author

Listed:
  • Satoshi Honma

    () (Faculty of Economics, Kyushu Sangyo University)

Abstract

We study asymmetric pollution taxation on identical polluting oligopolists engaged in Cournot competition. It has been studied that an identical firms must be treated symmetrically and that the second-best pollution tax is a uniform tax. But, asymmetric treatment of identical firms generates an aggregate cost-saving effect, which is oligopoly-specific property. We consider a manipulation of the uniform tax vector without changing the total emissions which will be emitted under the uniform pollution tax. We derive a sufficient condition that guarantees that unequal taxation on ex ante identical polluters increases welfare. We show that if the sufficient condition is satisfied, unequal emission standards as well as unequal taxation increases welfare.

Suggested Citation

  • Satoshi Honma, 2005. "Pollution Tax and Social Welfare in Oligopoly: Asymmetric Taxation on Identical Polluters," Discussion Papers 23, Kyushu Sangyo University, Faculty of Economics.
  • Handle: RePEc:kyu:dpaper:23
    as

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    File URL: http://www.ip.kyusan-u.ac.jp/keizai-kiyo/dp23.pdf
    File Function: First version, 2005
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    References listed on IDEAS

    as
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    4. Aidt, T.S.Toke Skovsgaard & Dutta, Jayasri, 2004. "Transitional politics: emerging incentive-based instruments in environmental regulation," Journal of Environmental Economics and Management, Elsevier, vol. 47(3), pages 458-479, May.
    5. B. Douglas Bernheim & Michael D. Whinston, 1986. "Menu Auctions, Resource Allocation, and Economic Influence," The Quarterly Journal of Economics, Oxford University Press, vol. 101(1), pages 1-31.
    6. Fredriksson, Per G., 1997. "The Political Economy of Pollution Taxes in a Small Open Economy," Journal of Environmental Economics and Management, Elsevier, vol. 33(1), pages 44-58, May.
    7. Boyer, Marcel & Laffont, Jean-Jacques, 2003. "Competition and the reform of incentive schemes in the regulated sector," Journal of Public Economics, Elsevier, pages 2369-2396.
    8. Aidt, Toke S., 1998. "Political internalization of economic externalities and environmental policy," Journal of Public Economics, Elsevier, pages 1-16.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Cournot Duopoly; Firm Asymmetry; Pollution Tax; Environmental Policy;

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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