Environmental Taxes and Industry Monopolization

Frans de Vries and Lambert Schoonbeek

No 2008-19, Stirling Economics Discussion Papers from University of Stirling, Division of Economics

Abstract: This paper considers a market with an incumbent monopolistic firm and a potential entrant. Production by both firms causes polluting emissions. The government selects a tax per unit emission by maximizing social welfare. The size of the tax rate affects whether or not the potential entrant enters the market. We identify the conditions that create a market structure where the preferences of the government and the incumbent firm coincide. Interestingly, there are cases where both the government and incumbent firm prefer a monopoly. Hence, the government might induce profitable monopolization by using a socially optimal tax policy instrument.

Keywords: taxes; market structure; environmental pollution; monopoly (search for similar items in EconPapers)
Date: 2008-09
New Economics Papers: this item is included in nep-com, nep-ene, nep-env and nep-mic
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Citations: View citations in EconPapers (6)

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http://hdl.handle.net/1893/512

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Journal Article: Environmental taxes and industry monopolization (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:stl:stledp:2008-19

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