Environmental policy and stable collusion: The case of a dynamic polluting oligopoly

H. Benchekroun, A. Ray Chaudhuri

Research output: Contribution to journalArticleScientificpeer-review

8 Citations (Scopus)

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.
Original languageEnglish
Pages (from-to)479-490
JournalJournal of Economic Dynamics and Control
Volume35
Issue number4
DOIs
Publication statusPublished - 2011

Fingerprint Dive into the research topics of 'Environmental policy and stable collusion: The case of a dynamic polluting oligopoly'. Together they form a unique fingerprint.

  • Cite this