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Hold-up Problems with Respect to R&D Investment and Licensing in Environmental Regulation

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  • Breitscheidel, Jörg

Abstract

We explore the design of self-financing tax-subsidy schemes to solve hold-up problems in environmental regulation. The announcement of the tax rate seems to be preferable to solve hold-up problems with respect to the investment in environmental R&D. In contrast, only the announcement of the subsidy rate is adequate to solve hold-up problems with respect to the licensing of environmentally friendly technologies. Altogether, the announcement of the subsidy rate yields higher expected social welfare than the announcement of the tax rate or the standard emission taxation if the marginal damage of emissions exceeds a certain level.

Suggested Citation

  • Breitscheidel, Jörg, 2005. "Hold-up Problems with Respect to R&D Investment and Licensing in Environmental Regulation," ZEW Discussion Papers 05-86, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    • Handle: RePEc:zbw:zewdip:4569
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    More about this item

    Keywords

    Hold-up problems; Environmental regulation; Taxes and subsidies; Selffinancing mechanisms; Emission control;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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