Strategic Emission Fees: Using Green Technology to Deter Entry

Ana Espinola-Arredondo, Felix Munoz-Garcia and Boying Liu ()
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Boying Liu: Washington State University

Journal of Industry, Competition and Trade, 2019, vol. 19, issue 2, No 7, 313-349

Abstract: Abstract We consider a sequential-move game in which a polluting monopolist chooses whether to acquire a green technology, and a potential entrant responds deciding whether to join the market and, upon entry, whether to invest in clean technology. Our paper compares two models: one in which environmental regulation is strategically set before firms’ decisions; and another where regulation is selected after firms’ entry and investment decisions. We show that a proactive regulation that strategically anticipates firms’ behavior can implement different market structures. In particular, policy makers can choose emission fees to induce competition and/or investment in clean technology, giving rise to market structures that maximize social welfare.

Keywords: Green technology adoption; Market structure; Emission tax; Strategic regulation (search for similar items in EconPapers)
JEL-codes: H23 L12 Q58 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s10842-019-00292-6

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