Environmental Taxation and Strategic Commitment in Duopoly Models

Fredrik Carlsson

Environmental & Resource Economics, 2000, vol. 15, issue 3, 243-256

Abstract: In this paper, we address the issue of optimalenvironmental taxation under imperfect competition.The problem is analysed for three different types ofduopoly models, the Cournot open and closed loopmodels, and the Stackelberg model. We explicitlyanalyse the role of strategic behaviour. Each firm hasto make a choice of output level and of the level ofa strategic variable. The choice of this strategicvariable affects both marginal cost and emissions. Wecompare the properties of these three duopoly models,and derive and compare optimal environmental taxes. Weshow that whether the optimal tax is lower or higherthan marginal environmental costs depends on theinformation transmission and the effect of thestrategic variable on marginal costs. In addition, thedifferences in market shares, and the influence of thetax on the cost structure play important roles, indetermining optimal emission taxes. Copyright Kluwer Academic Publishers 2000

Keywords: environmental taxation; oligopoly; optimal taxation; strategic commitment (search for similar items in EconPapers)
Date: 2000
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Citations: View citations in EconPapers (41)

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DOI: 10.1023/A:1008362222639

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