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Optimal Privatization Policy in a Mixed Eco-Industry in the Presence of Commitments on Abatement Technologies

Author

Listed:
  • Lee, Sang-Ho
  • Nakamura, Tamotsu
  • Park, Chul-Hi

Abstract

We formulate the vertical market structure with a downstream polluting industry and an upstream eco-industry, where both private and public eco-firms produce abatement goods. We then investigate the voluntary commitments on target emissions from polluting firms and their impacts on the optimal decisions of privatization policies. We provide the conditions for the non-optimality of partial privatization and show that, depending on the environmental damage, full nationalization, full privatization or partial privatization can be optimal. In particular, it is shown that there is a U-shaped relationship between environmental damage and the optimal degree of privatization. It supports that government should have large ownership of privatized eco-firms for environmental protection when environmental damage is serious.

Suggested Citation

  • Lee, Sang-Ho & Nakamura, Tamotsu & Park, Chul-Hi, 2017. "Optimal Privatization Policy in a Mixed Eco-Industry in the Presence of Commitments on Abatement Technologies," MPRA Paper 80902, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:80902
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    File URL: https://mpra.ub.uni-muenchen.de/80902/1/MPRA_paper_80902.pdf
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    References listed on IDEAS

    as
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    3. 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, March.
    4. Susumu Cato & Toshihiro Matsumura, 2012. "Long-Run Effects of Foreign Penetration on Privatization Policies," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 168(3), pages 444-454, September.
    5. repec:hit:hitjcm:v:56:y:2015:i:1:p:135-154 is not listed on IDEAS
    6. Maia David & Bernard Sinclair-Desgagné, 2005. "Environmental Regulation and the Eco-Industry," Journal of Regulatory Economics, Springer, vol. 28(2), pages 141-155, September.
    7. Alain-Désiré Nimubona & Bernard Sinclair-Desgagné, 2011. "Polluters and Abaters," Annals of Economics and Statistics, GENES, issue 103-104, pages 9-24.
    8. Xu, Lili & Lee, Sang-Ho, 2015. "Strategic Privatization With Tariffs And Environmental Taxes In An International Mixed Duopoly," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 56(1), pages 135-154, June.
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    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Abatement Goods; Commitments; Eco-Industry; Mixed Oligopoly; Partial Privatization;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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