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Optimal Pollution Control in a Mixed Oligopoly with Research Spillovers

Shoji Haruna and Rajeev Goel

No 6909, CESifo Working Paper Series from CESifo Group Munich

Abstract: We study optimal pollution abatement under a mixed oligopoly game when firms engage in emissions-reducing R&D that is imperfectly appropriable. The regulator uses a tax to curb emissions. Results show that in a mixed oligopoly, the public firm has positive emissions reduction in equilibrium; however, emissions reductions of the private firm could be positive or zero. Under certain conditions, the optimal pollution tax is positive; otherwise, the tax reverts to a subsidy. Comparing mixed and private duopolies, privatization leads to reductions in R&D and output, but to an increase in overall emissions, so privatization tends to make the environment worse.

Keywords: mixed oligopoly; R&D; pollution; spillovers; taxation; subsidy (search for similar items in EconPapers)
JEL-codes: D43 D62 O33 Q55 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene, nep-env and nep-gth
Date: 2018
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