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Optimal policy under duopoly with environmental quality

Author

Listed:
  • Patcharin Koonsed

    (Graduate School of Economics, Osaka University)

Abstract

This paper examines the optimal excise tax policy and the optimal environmental quality subsidy when consumers are willing to pay a price premium for environmentally friendlier variants of commodities with vertically differentiated environmental qualities. When high and low environmental quality producers exist in the market and the demand for both firms are positive, two policies are necessary to revise the firms' market power and the pollution externalities. Conversely, when all consumers demand high environmental quality products, only one policy is required to correct the pollution　externality.

Suggested Citation

  • Patcharin Koonsed, 2015. "Optimal policy under duopoly with environmental quality," Economics Bulletin, AccessEcon, vol. 35(3), pages 1976-1984.
    • Handle: RePEc:ebl:ecbull:eb-15-00285
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2015/Volume35/EB-15-V35-I3-P201.pdf
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    References listed on IDEAS

    as
    1. C. Lombardini-Riipinen, 2005. "Optimal Tax Policy under Environmental Quality Competition," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 32(3), pages 317-336, November.
    2. Bansal, Sangeeta & Gangopadhyay, Shubhashis, 2003. "Tax/subsidy policies in the presence of environmentally aware consumers," Journal of Environmental Economics and Management, Elsevier, vol. 45(2, Supple), pages 333-355, March.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Ourania Karakosta, 2018. "Tax Competition in Vertically Differentiated Markets with Environmentally Conscious Consumers," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 69(4), pages 693-711, April.
    2. Paolo G. Garella, 2021. "The effects of taxes and subsidies on environmental qualities in a differentiated duopoly," Letters in Spatial and Resource Sciences, Springer, vol. 14(2), pages 197-209, August.
    3. G. Ceccantoni & O. Tarola & C. Vergari, 2017. "Relative tax in a vertically differentiated market: the key role of consumers in environment," Working Papers wp2005, Dipartimento Scienze Economiche, Universita' di Bologna.

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    More about this item

    Keywords

    environmentally conscious consumers; environmental quality; excise tax; subsidies; R&D; vertical differentiation;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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