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


  • Satoshi Honma

    () (Faculty of Economics, Kyushu Sangyo University)


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

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    Cited by:

    1. 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.

    More about this item


    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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