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Environmental Quality in a Differentiated Duopoly

Author

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  • Farzin, Y. Hossein
  • Akao, Ken-Ichi

Abstract

In a duopoly industry with environmentally differentiated products, we examine the effects of introducing a mandatory environmental quality standard on firms' environmental quality choices, profits, and the average environmental quality offered by the industry. We show that at low standard levels, both firms choose to overcomply regardless of the standard level. At intermediate levels, the mandatory standard can reduce the profit of the low-cost firm while increasing that of the high-cost firm, and that it can lower the industry's average environmental quality below what it would be without the standard.

Suggested Citation

  • Farzin, Y. Hossein & Akao, Ken-Ichi, 2006. "Environmental Quality in a Differentiated Duopoly," Economic Theory and Applications Working Papers 12183, Fondazione Eni Enrico Mattei (FEEM).
    • Handle: RePEc:ags:feemet:12183
    DOI: 10.22004/ag.econ.12183
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    References listed on IDEAS

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    5. Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
    6. Y. H. Farzin, 2004. "Can Stricter Environmental Standards Benefit the Industry and Enhance Welfare," Annals of Economics and Statistics, GENES, issue 75-76, pages 223-255.
    7. Anton, W.R.Q.Wilma Rose Q. & Deltas, George & Khanna, Madhu, 2004. "Incentives for environmental self-regulation and implications for environmental performance," Journal of Environmental Economics and Management, Elsevier, vol. 48(1), pages 632-654, July.
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    9. Maloney, Michael T & McCormick, Robert E, 1982. "A Positive Theory of Environmental Quality Regulation," Journal of Law and Economics, University of Chicago Press, vol. 25(1), pages 99-123, April.
    10. Farzin, Y H, 2003. "The Effects of Emissions Standards on Industry," Journal of Regulatory Economics, Springer, vol. 24(3), pages 315-327, November.
    11. J Videras & A Alberini, 2000. "The appeal of voluntary environmental programs: which firms participate and why?," Contemporary Economic Policy, Western Economic Association International, vol. 18(4), pages 449-460, October.
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    Cited by:

    1. Rinaldo Brau & Carlo Carraro, 2011. "The design of voluntary agreements in oligopolistic markets," Journal of Regulatory Economics, Springer, vol. 39(2), pages 111-142, April.
    2. Mireille Chiroleu-Assouline, 2010. "Green Leader or Green Liar? Differentiation and the role of NGOs," Documents de travail du Centre d'Economie de la Sorbonne 10097, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.

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    More about this item

    Keywords

    Environmental Economics and Policy;

    JEL classification:

    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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