Environmental Taxation and Vertical Cournot Oligopolies: How Eco-industries Matter

Joan Canton, Antoine Soubeyran and Hubert Stahn ()
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Joan Canton: GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique
Antoine Soubeyran: GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique
Hubert Stahn: AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique

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Abstract: This article specifies what an optimal pollution tax should be when dealing with a vertical Cournot oligopoly. Polluting firms sell final goods to consumers and outsource their abatement activities to an environment industry. It is assumed that both markets are imperfectly competitive. Thus, the tax is a single instrument used to regulate three sorts of distortions, one negative externality and two restrictions in production. Consequently, the optimal tax rate is the result of a trade-off that depends on the firms' market power along the vertical structure. A detailed analysis of Cournot-Nash equilibria in both markets is also performed. In this context, the efficiency of abatement activities plays a key-role. It gives a new understanding to the necessary conditions for the emergence of an eco-industrial sector

Keywords: Vertical Cournot oligopolies; Environmental taxation ·; End-of-pipe pollution abatement ·; Eco-industry · (search for similar items in EconPapers)
Date: 2007-10-05
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Published in Environmental and Resource Economics, 2007, 40 (3), pp.369-382. ⟨10.1007/s10640-007-9158-8⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05480405

DOI: 10.1007/s10640-007-9158-8

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