Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5099587 | Journal of Economic Dynamics and Control | 2011 | 12 Pages |
Abstract
We show that the imposition of a Markovian tax on emissions, that is, a tax rate which depends on the pollution stock, can induce stable cartelization in an oligopolistic polluting industry. This does not hold for a uniform tax. Thus, accounting for the feedback effect that exists within a dynamic framework, where pollution is allowed to accumulate into a stock over time, changes the result obtained within a static framework. Moreover, the cartel formation can diminish the welfare gain from environmental regulation such that welfare under environmental regulation and collusion of firms lies below that under a laissez-faire policy.
Related Topics
Physical Sciences and Engineering
Mathematics
Control and Optimization
Authors
Hassan Benchekroun, Amrita Ray Chaudhuri,