Optimal policy under duopoly with environmental quality

Patcharin Koonsed ()
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Patcharin Koonsed: Graduate School of Economics, Osaka University

Economics Bulletin, 2015, vol. 35, issue 3, 1976-1984

Abstract: This paper examines the optimal excise tax policy and the optimal environmental quality subsidy when consumers are willing to pay a price premium for environmentally friendlier variants of commodities with vertically differentiated environmental qualities. When high and low environmental quality producers exist in the market and the demand for both firms are positive, two policies are necessary to revise the firms' market power and the pollution externalities. Conversely, when all consumers demand high environmental quality products, only one policy is required to correct the pollution　externality.

Keywords: environmentally conscious consumers; environmental quality; excise tax; subsidies; R&D; vertical differentiation (search for similar items in EconPapers)
JEL-codes: H2 L1 (search for similar items in EconPapers)
Date: 2015-09-22
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Citations: View citations in EconPapers (3)

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