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The Timing Of Environmental Tax Policy With A Consumer-Friendly Firm

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  • LEAL, MARIEL
  • GARCIA, ARTURO
  • LEE, SANG-HO

Abstract

This study considers a Cournot duopoly model with a consumer-friendly firm and analyzes the interplay between the strategic choice of abatement technology and the timing of governmentʼs commitment to the environmental tax policy. We show that the optimal emission tax under committed policy regime is always higher than that under non-committed one, but both taxes can be higher than marginal environmental damage when the consumer-friendliness is high enough. We also show that the emergence of a consumer-friendly firm might yield better outcomes to both welfare and environmental quality without the commitment to the environmental policy.

Suggested Citation

  • Leal, Mariel & Garcia, Arturo & Lee, Sang-Ho, 2018. "The Timing Of Environmental Tax Policy With A Consumer-Friendly Firm," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 59(1), pages 25-43, June.
    • Handle: RePEc:hit:hitjec:v:59:y:2018:i:1:p:25-43
    DOI: 10.15057/29257
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    abatement technology; commitment; consumer-friendly firm; emission tax; environmental policy;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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