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EMISSION TAXES, CLEAN TECHNOLOGY COOPERATION, AND PRODUCT MARKET COLLUSION: EXPERIMENTAL EVIDENCE

Soo Keong Yong, Lana Friesen () and Stuart McDonald ()

Economic Inquiry, 2018, vol. 56, issue 4, 1950-1979

Abstract: We use a laboratory experiment to study the link between cooperative research and development (R&D) in clean technology and collusion in a downstream product market in the presence of a time‐consistent emissions tax. Such a tax creates additional interconnections between firms, in addition to the standard technological spillovers. Our results show a strong link between R&D cooperation and market collusion under symmetric R&D spillovers in a duopoly, but when the spillovers are asymmetric, R&D cooperation does not necessarily result in collusion. With symmetric spillovers, the link between R&D cooperation and collusion remains strong even in three‐ and four‐firm industries. (JEL C90, L5, O30, Q55)

Date: 2018
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