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Tradeable Emission Permits in Oligopoly

Fershtman,C.
de Zeeuw,A.J.
Abstract
The paper considers an oligopolistic industry in which pollution is a by-product of production. Firms are assumed to have emission permits that restrict the amount that they pollute. These permits are assumed to be tradeable and the paper discusses a structure in which the same set of firms operates both in the product market as well as in the pollution permits market. The paper demonstrates that in such a structure allowing trade in emission permits is not necessarily beneficial. In particular it may lead to the choice of inferior production and abatement technologies, it may lead to a market equilibrium with lower output rates and higher prices and it may result in a shift of production from a low cost to a high cost firm.
Description
Pagination: 30
Date
1996
Journal Title
Journal ISSN
Volume Title
Publisher
Microeconomics
Research Projects
Organizational Units
Journal Issue
Keywords
pollution control, oligopoly, trade, emission permit
Citation
Fershtman, C & de Zeeuw, A J 1996 'Tradeable Emission Permits in Oligopoly' CentER Discussion Paper, vol. 1996-30, Microeconomics, Tilburg.
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