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Pollution Tax under Lobbying Duopolists

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  • Satoshi Honma

    (Faculty of Economics, Kyushu Sangyo University)

Abstract

We study a model which explains a politically determined pollution tax outcome under asymmetric duopoly. We assume an asymmetry of firms in the pollution emissions per unit of output. The polluting duopoly and three-stage political game are considered. We derive the equilibrium tax rate and show that it might excess the marginal external damages, even without an environmental group. The politically determined tax rate is decomposed to the marginal external damages, the imperfect competition effect, and the lobbying effect. Under linear demand and cost functions, we derive the condition that Pigouvian taxation is politically determined. The effect on the equilibrium tax of firm heterogeneity is discussed.

Suggested Citation

  • Satoshi Honma, 2005. "Pollution Tax under Lobbying Duopolists," Discussion Papers 22, Kyushu Sangyo University, Faculty of Economics.
    • Handle: RePEc:kyu:dpaper:22
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    File URL: http://www.ip.kyusan-u.ac.jp/keizai-kiyo/dp22.pdf
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    References listed on IDEAS

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    1. Richard Damania, 2003. "Protectionist Lobbying and Strategic Investment," The Economic Record, The Economic Society of Australia, vol. 79(244), pages 57-69, March.
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    3. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-850, September.
    4. Aidt, T.S.Toke Skovsgaard & Dutta, Jayasri, 2004. "Transitional politics: emerging incentive-based instruments in environmental regulation," Journal of Environmental Economics and Management, Elsevier, vol. 47(3), pages 458-479, May.
    5. Fredriksson, Per G., 1997. "The Political Economy of Pollution Taxes in a Small Open Economy," Journal of Environmental Economics and Management, Elsevier, vol. 33(1), pages 44-58, May.
    6. Fredriksson, Per G. & Svensson, Jakob, 2003. "Political instability, corruption and policy formation: the case of environmental policy," Journal of Public Economics, Elsevier, vol. 87(7-8), pages 1383-1405, August.
    7. Aidt, Toke S., 1998. "Political internalization of economic externalities and environmental policy," Journal of Public Economics, Elsevier, vol. 69(1), pages 1-16, July.
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    Cited by:

    1. Qianqian Shao & Thorsten Janus & Maarten J. Punt & Justus Wesseler, 2018. "The Conservation Effects of Trade with Imperfect Competition and Biased Policymakers," Agriculture, MDPI, vol. 8(7), pages 1-22, July.

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    More about this item

    Keywords

    Cournot duopoly; firm heterogeneity; lobbying activity; political economy; pollution tax;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • 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

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