Colluding Against Environmental Regulation

Jorge Ale-Chilet, Cuicui Chen, Jing Li and Mathias Reynaert

No 21-1204, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: We study collusion among firms against imperfectly monitored environmental regulation. Firms increase variable profits by violating regulation and reduce expected noncompliance penal-ties by violating jointly. We consider a case of three German automakers colluding to reduce the effectiveness of emissions control technology. By estimating a structural model of the European automobile industry from 2007 to 2018, we find that collusion lowers expected noncompliance penalties substantially and increases buyer and producer surplus. Due to increased pollution, welfare decreases by e 1.57–5.57 billion. We show how environmental policy design and antitrust play complementary roles in preventing noncompliance.

Keywords: Collusion; regulation; pollution; automobile market; noncompliance (search for similar items in EconPapers)
JEL-codes: L4 L5 L6 Q5 (search for similar items in EconPapers)
Date: 2021-04
New Economics Papers: this item is included in nep-com, nep-ene, nep-env, nep-law and nep-res
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Working Paper: Colluding Against Environmental Regulation (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:tse:wpaper:125488

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