Environmental policy and stable collusion: The case of a dynamic polluting oligopoly
Benchekroun,H. Ray Chaudhuri,A.
Benchekroun,H.
Ray Chaudhuri,A.
Abstract
We show that the imposition of a Markovian tax on emissions, that is, a tax rate which depends on the pollution stock, can induce stable cartelization in an oligopolistic polluting industry. This does not hold for a uniform tax. Thus, accounting for the feedback effect that exists within a dynamic framework, where pollution is allowed to accumulate into a stock over time, changes the result obtained within a static framework. Moreover, the cartel formation can diminish the welfare gain from environmental regulation such that welfare under environmental regulation and collusion of firms lies below that under a laissez-faire policy.
Description
Appeared earlier as CentER DP 2008-80 (rt)
Date
2011
Journal Title
Journal ISSN
Volume Title
Publisher
Research Projects
Organizational Units
Journal Issue
Keywords
SDG 9 - Industry, Innovation, and Infrastructure
Citation
Benchekroun, H & Ray Chaudhuri, A 2011, 'Environmental policy and stable collusion : The case of a dynamic polluting oligopoly', Journal of Economic Dynamics & Control, vol. 35, no. 4, pp. 479-490. https://doi.org/10.1016/j.jedc.2010.12.003