Managerial Delegation Contracts, “Green” R&D and Emissions Taxation
Joanna Poyago-Theotoky and
Yong Soo Keong ()
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Yong Soo Keong: Xi'an Jiaotong-Liverpool University, International Business School Suzhou, Business Building, South Campus, 8 Chongwen Road, Suzhou Dushu Lake Science and Education Innovation District, Suzhou Industrial ParkSuzhou, China
The B.E. Journal of Theoretical Economics, 2019, vol. 19, issue 2, 10
We introduce an explicit environmental incentive into a managerial compensation contract in the context of a Cournot duopoly with pollution externalities under an emissions tax regime. We show that, depending on the effectiveness of “green” R&D, compared to a standard sales compensation contract, the explicit environmental focused contract results in more abatement. As a consequence, the regulator sets a lower emissions tax, and social welfare is higher. Moreover, in general, firm owners earn higher profits when adopting the environmental delegation contract.
Keywords: “green” R&D; abatement; emissions tax; managerial delegation; cournot duopoly (search for similar items in EconPapers)
JEL-codes: H23 L1 M5 Q58 (search for similar items in EconPapers)
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