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Vertical integration and first‐mover advantages in environmental taxes

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  • Juan Carlos Bárcena‐Ruiz
  • María Luz Campo

Abstract

This paper analyzes whether vertical integration between firms and suppliers encourages governments to behave as leaders in environmental policies. To study this issue, we consider transboundary pollution and two countries, with one firm in each country. We find that whether governments prefer to be leaders or followers in environmental taxes depends on two factors: whether firms are vertically integrated or not and the degree to which environmental pollution spills over to trading partners. When this overspill takes an intermediate value, taxes are set sequentially under vertical integration, but they are set simultaneously without it.

Suggested Citation

  • Juan Carlos Bárcena‐Ruiz & María Luz Campo, 2020. "Vertical integration and first‐mover advantages in environmental taxes," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(6), pages 1033-1039, September.
    • Handle: RePEc:wly:mgtdec:v:41:y:2020:i:6:p:1033-1039
    DOI: 10.1002/mde.3157
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    References listed on IDEAS

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    6. Bárcena-Ruiz, Juan Carlos & Campo, María Luz, 2017. "Taxes versus standards under cross-ownership," Resource and Energy Economics, Elsevier, vol. 50(C), pages 36-50.
    7. Falk Ita & Mendelsohn Robert, 1993. "The Economics of Controlling Stock Pollutants: An Efficient Strategy for Greenhouse Gases," Journal of Environmental Economics and Management, Elsevier, vol. 25(1), pages 76-88, July.
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