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Strategic Emission Fees: Using Green Technology to Deter Entry

Author

Listed:
  • Ana Espínola-Arredondo

    (Washington State University)

  • Felix Munoz-Garcia

    (Washington State University)

  • Boying Liu

    (Washington State University)

Abstract

We consider a sequential-move game in which a polluting monopolist chooses whether to acquire a green technology, and a potential entrant responds deciding whether to join the market and, upon entry, whether to invest in clean technology. Our paper compares two models: one in which environmental regulation is strategically set before firms’ decisions; and another where regulation is selected after firms’ entry and investment decisions. We show that a proactive regulation that strategically anticipates firms’ behavior can implement different market structures. In particular, policy makers can choose emission fees to induce competition and/or investment in clean technology, giving rise to market structures that maximize social welfare.

Suggested Citation

  • Ana Espínola-Arredondo & Felix Munoz-Garcia & Boying Liu, 2019. "Strategic Emission Fees: Using Green Technology to Deter Entry," Journal of Industry, Competition and Trade, Springer, vol. 19(2), pages 313-349, June.
    • Handle: RePEc:kap:jincot:v:19:y:2019:i:2:d:10.1007_s10842-019-00292-6
    DOI: 10.1007/s10842-019-00292-6
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    References listed on IDEAS

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    Cited by:

    1. Strandholm John C. & Espínola-Arredondo Ana, 2020. "Investment in Green Technology and Entry Deterrence," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 20(2), pages 1-18, April.
    2. John C. Strandholm, 2020. "Promotion of Green Technology under Different Environmental Policies," Games, MDPI, vol. 11(3), pages 1-23, August.

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    More about this item

    Keywords

    Green technology adoption; Market structure; Emission tax; Strategic regulation;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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