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Environmental Quality in a Differentiated Duopoly

Y. Hossein Farzin () and Ken-Ichi Akao

No 12183, Economic Theory and Applications Working Papers from Fondazione Eni Enrico Mattei (FEEM)

Abstract: In a duopoly industry with environmentally differentiated products, we examine the effects of introducing a mandatory environmental quality standard on firms' environmental quality choices, profits, and the average environmental quality offered by the industry. We show that at low standard levels, both firms choose to overcomply regardless of the standard level. At intermediate levels, the mandatory standard can reduce the profit of the low-cost firm while increasing that of the high-cost firm, and that it can lower the industry's average environmental quality below what it would be without the standard.

Keywords: Environmental; Economics; and; Policy (search for similar items in EconPapers)
Pages: 30
Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:ags:feemet:12183

DOI: 10.22004/ag.econ.12183

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