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Firm Preferences for Environmental Regulation

Felix Munoz-Garcia () and Sherzod Akhundjanov ()

Review of Environment, Energy and Economics - Re3, 2014

Abstract: This paper summarizes the findings of two papers that examine the effect of environmental regulation on the production decisions and profits of polluting and green firms. Using a game-theoretic framework, we find conditions under which the green firm favors regulation (a standard finding), but also derive conditions for the opposite –and more surprising– scenario, whereby the green firm opposes environmental regulation, while the brown firm favors it. We also show that similar preference reversals can occur towards uniform and fine-tuned regulation. Our study highlights the role that firm heterogeneity plays in determining firm preferences towards environmental regulation.

Keywords: Cost asymmetry; Cost disadvantage; Emission fees; Green firms (search for similar items in EconPapers)
JEL-codes: L13 D62 H23 Q50 (search for similar items in EconPapers)
Date: 2014
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