Environmental Regulations on Vertical Oligopolies with Eco-Industry

Sang-Ho Lee and Chul-Hi Park ()

Korean Economic Review, 2011, vol. 27, 311-327

Abstract: This article investigates optimal environmental regulations on vertical oligopolies where the upstream eco-industry produces abatement goods reducing pollutants and the downstream polluting industry produces consumption goods emitting pollutants. Under Cournot competition with blockaded entry, we analyze the environmental tax for externality and abatement subsidy for abatement activity. We also incorporate free entry case to examine the equilibrium number of firms in each industry, and then propose an entry fee for downstream polluting industry to lessen excessive entry and an entry subsidy for upstream eco-industry to increase insufficient entry when market concentration in eco-industry is significant. Finally, we show that under the two-part system with entry fee/subsidy and environmental tax/subsidy, the regulator can achieve the first-best market performance and fiscal equivalence with the Pigouvian rule.

Keywords: Eco-Industry; Vertical Oligopoly; Abatement Subsidy; Output Tax; Endogenous Entry (search for similar items in EconPapers)
JEL-codes: D6 L5 Q2 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://keapaper.kea.ne.kr/RePEc/kea/keappr/KER-20111231-27-2-07.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kea:keappr:ker-20111231-27-2-07

Access Statistics for this article

Korean Economic Review is currently edited by Kyung Hwan Baik

More articles in Korean Economic Review from Korean Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by KEA ().