IDEAS home Printed from https://ideas.repec.org/p/cec/wpaper/1413.html
   My bibliography  Save this paper

Tax Policy in a Simple General Oligopoly Equilibrium Model with Pollution Permits

Author

Listed:
  • Bertrand Crettez
  • Pierre-André Jouvet
  • Ludovic A. Julien

Abstract

We introduce a pollution permits market in a general oligopoly equilibrium model. Specifically, we consider a two-commodity economy with one productive sector. The first commodity is inelastically supplied by a set of competitive traders. The second commodity is produced by a set of strategic traders, using the first commodity as an input. The production of the second commodity is a polluting activity. Introducing a competitive emissions permits market solves the pollution control problem but is not sufficient to eliminate market distortions and to reach a Pareto optimal allocation. We study the conditions under which a subsidy to the strategic agents, financed by a tax on the competitive agents, is welfare increasing.

Suggested Citation

  • Bertrand Crettez & Pierre-André Jouvet & Ludovic A. Julien, 2014. "Tax Policy in a Simple General Oligopoly Equilibrium Model with Pollution Permits," Working Papers 1413, Chaire Economie du climat.
    • Handle: RePEc:cec:wpaper:1413
    as

    Download full text from publisher

    File URL: http://www.chaireeconomieduclimat.org/RePEc/cec/wpaper/14-09-Cahier-R-2014-13-Crettez-et-al.pdf
    File Function: First version, 2014
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Jaskold Gabszewicz, Jean & Vial, Jean-Philippe, 1972. "Oligopoly "A la cournot" in a general equilibrium analysis," Journal of Economic Theory, Elsevier, vol. 4(3), pages 381-400, June.
    2. Robert W. Hahn, 1984. "Market Power and Transferable Property Rights," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 99(4), pages 753-765.
    3. Delipalla, Sofia & Keen, Michael, 1992. "The comparison between ad valorem and specific taxation under imperfect competition," Journal of Public Economics, Elsevier, vol. 49(3), pages 351-367, December.
    4. Codognato, Giulio & Gabszewicz, Jean J, 1993. "Cournot-Walras Equilibria in Markets with a Continuum of Traders," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 3(3), pages 453-464, July.
    5. SANIN, Maria Eugenia & ZANAJ, Skerdilajda, 2007. "Environmental innovation under Cournot competition," LIDAM Discussion Papers CORE 2007050, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    6. Jean Gabszewicz & Giulio Codognato, 1991. "Équilibres de Cournot-Walras dans une économie d'échange," Revue Économique, Programme National Persée, vol. 42(6), pages 1013-1026.
    7. Juan-Pablo Montero, 2009. "Market Power in Pollution Permit Markets," The Energy Journal, International Association for Energy Economics, vol. 0(Special I).
    8. Birgit Grodal & Egbert Dierker, 1999. "The price normalization problem in imperfect competition and the objective of the firm," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 14(2), pages 257-284.
    9. Lisa Grazzini, 2006. "A Note on Ad Valorem and Per Unit Taxation in an Oligopoly Model," Journal of Economics, Springer, vol. 89(1), pages 59-74, October.
    10. María-Eugenia Sanin & Skerdilajda Zanaj, 2011. "A Note on Clean Technology Adoption and its Influence on Tradeable Emission Permits Prices," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 48(4), pages 561-567, April.
    11. Myles, Gareth D., 1989. "Ramsey tax rules for economies with imperfect competition," Journal of Public Economics, Elsevier, vol. 38(1), pages 95-115, February.
    12. Gerard Debreu, 1963. "On a Theorem of Scarf," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 30(3), pages 177-180.
    13. Montero, Juan-Pablo, 2002. "Market Structure and Environmental Innovation," Journal of Applied Economics, Universidad del CEMA, vol. 5(2), pages 1-33, November.
    14. Jean J. Gabszewicz & Lisa Grazzini, 1999. "Taxing Market Power," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 1(4), pages 475-497, October.
    15. Julien, Ludovic A. & Tricou, Fabrice, 2005. "Specialized oligopolies in a pure exchange economy: The symmetric Cournot-Walras equilibrium," Research in Economics, Elsevier, vol. 59(3), pages 280-292, September.
    16. Julien, Ludovic A., 2011. "Unemployment equilibrium and economic policy in mixed markets," Economic Modelling, Elsevier, vol. 28(4), pages 1931-1940, July.
    17. Juan-Pablo Montero, 2002. "Market Structure and Environmental Innovation," Journal of Applied Economics, Taylor & Francis Journals, vol. 5(2), pages 293-325, November.
    18. Stokey, Nancy L, 1998. "Are There Limits to Growth?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(1), pages 1-31, February.
    19. Guesnerie, Roger & Laffont, Jean-Jacques, 1978. "Taxing price makers," Journal of Economic Theory, Elsevier, vol. 19(2), pages 423-455, December.
    20. Reinhorn Leslie J., 2005. "Optimal Taxation with Cournot Oligopoly," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(1), pages 1-29, October.
    21. Sanin, Maria-Eugenia & Zanaj, Skerdilajda, 2012. "Clean Technology Adoption Under Cournot Competition," Strategic Behavior and the Environment, now publishers, vol. 2(2), pages 159-172, July.
    22. Kazuhiko Kato, 2006. "Can Allowing to Trade Permits Enhance Welfare in Mixed Oligopoly?," Journal of Economics, Springer, vol. 88(3), pages 263-283, September.
    23. Roberts, Kevin, 1980. "The limit points of monopolistic competition," Journal of Economic Theory, Elsevier, vol. 22(2), pages 256-278, April.
    24. Karl-Martin Ehrhart & Christian Hoppe & Ralf Löschel, 2008. "Abuse of EU Emissions Trading for Tacit Collusion," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 41(3), pages 347-361, November.
    25. Dafna Eshel, 2005. "Optimal Allocation of Tradable Pollution Rights and Market Structures," Journal of Regulatory Economics, Springer, vol. 28(2), pages 205-223, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Anicet Kabre, 2018. "Cobb-Douglas preferences and pollution in a bilateral oligopoly market," Working Papers hal-04141683, HAL.
    2. Anicet Kabre, 2018. "Cobb-Douglas preferences and pollution in a bilateral oligopoly market," EconomiX Working Papers 2018-48, University of Paris Nanterre, EconomiX.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ludovic A. Julien & Anicet Kabre & Louis de Mesnard, 2022. "Pollution in strategic multilateral exchange: taxing emissions or trading on permit markets?," Post-Print hal-03791673, HAL.
    2. Wang, Xu & Zhang, Xiao-Bing & Zhu, Lei, 2019. "Imperfect market, emissions trading scheme, and technology adoption: A case study of an energy-intensive sector," Energy Economics, Elsevier, vol. 81(C), pages 142-158.
    3. Bingxin Zeng & Lei Zhu, 2019. "Market Power and Technology Diffusion in an Energy-Intensive Sector Covered by an Emissions Trading Scheme," Sustainability, MDPI, vol. 11(14), pages 1-18, July.
    4. GRAZZINI, Lisa, 2000. "Ad valorem and per unit taxation in an oligopoly model," LIDAM Discussion Papers CORE 2000054, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    5. Anicet Kabre, 2018. "Cobb-Douglas preferences and pollution in a bilateral oligopoly market," EconomiX Working Papers 2018-48, University of Paris Nanterre, EconomiX.
    6. Anicet Kabre, 2018. "Cobb-Douglas preferences and pollution in a bilateral oligopoly market," Working Papers hal-04141683, HAL.
    7. David R. Collie, 2019. "Taxation under oligopoly in a general equilibrium setting," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 21(4), pages 738-753, August.
    8. Rudy Colacicco, 2015. "Ten Years Of General Oligopolistic Equilibrium: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 29(5), pages 965-992, December.
    9. Cyrinus B. Elegbede & Ludovic A. Julien & Louis Mesnard, 2022. "On preferences and taxation mechanisms in strategic bilateral exchange," Review of Economic Design, Springer;Society for Economic Design, vol. 26(1), pages 43-73, March.
    10. Jianqiao LIU & Gamal ATALLAH, 2009. "Tradable Permits Under Environmental and Cost-reducing R&D," EcoMod2009 21500059, EcoMod.
    11. Busetto, Francesca & Codognato, Giulio & Ghosal, Sayantan, 2011. "Noncooperative oligopoly in markets with a continuum of traders," Games and Economic Behavior, Elsevier, vol. 72(1), pages 38-45, May.
    12. Tanachai Limpaitoon, Yihsu Chen, and Shmuel S. Oren, 2014. "The Impact of Imperfect Competition in Emission Permits Trading on Oligopolistic Electricity Markets," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    13. Camelia Bejan & Florin Bidian, 2012. "Ownership structure and efficiency in large economies," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 50(3), pages 571-602, August.
    14. Busetto, Francesca & Codognato, Giulio & Ghosal, Syantan, 2008. "Cournot-Walras Equilibrium as a Subgame Perfect Equilibrium," Economic Research Papers 269786, University of Warwick - Department of Economics.
    15. Francesca Busetto & Giulio Codognato & Sayantan Ghosal, "undated". "Noncooperative oligopoly in markets with a continuum of traders: a limit theorem a la Cournot," Working Papers 2014_01, Business School - Economics, University of Glasgow.
    16. Busetto, Francesca & Codognato, Giulio & Ghosal, Sayantan, 2014. "Noncooperative Oligopoly in Markets with a Continuum of Traders: A Limit Theorem µa la Cournot," SIRE Discussion Papers 2014-019, Scottish Institute for Research in Economics (SIRE).
    17. Stamatopoulos, Giorgos, 2019. "A strategic tax mechanism," MPRA Paper 93602, University Library of Munich, Germany.
    18. Busetto, Francesca & Codognato, Giulio & Ghosal, Sayantan, 2012. "Noncooperative Oligopoly in Markets with a Continuum of Traders: A Limit Theorem," The Warwick Economics Research Paper Series (TWERPS) 994, University of Warwick, Department of Economics.
    19. Ludovic A. Julien & Fabrice Tricou, 2008. "Market Price Mechanisms and Stackelberg General Equilibria," Working Papers hal-04140726, HAL.
    20. GABSZEWICZ, Jean & GRAZZINI, Lisa, 2000. "Strategic multilateral exchange and taxes," LIDAM Discussion Papers CORE 2000063, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

    More about this item

    Keywords

    oligopoly equilibrium; taxation policy; pollution.;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cec:wpaper:1413. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chaire Economie du Climat (email available below). General contact details of provider: http://www.chaireeconomieduclimat.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.