Dynamic environmental taxes in an international duopoly

Shuichi Ohori ()
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Shuichi Ohori: Institute of Economic Research, Kyoto University

No 628, KIER Working Papers from Kyoto University, Institute of Economic Research

Abstract: This paper studies a dynamic game of environmental taxes between two countries in a Cournot duopoly. Based on the assumption of linear demand functions, we demonstrate that the environmental tax in the steady-state equilibrium is lower in a dynamic environmental tax game than in a static environmental one. Therefore, the dynamic behavior of the governments results in an increase in the environmental damage. Further, as a result of international cooperation on environmental taxes between two countries in the first period, there is an increase in the optimal environmental tax; this is due to the decrease in the effect of the rent-shifting.

Keywords: environmental tax; dynamic programming; international duopoly (search for similar items in EconPapers)
JEL-codes: F18 H23 Q58 (search for similar items in EconPapers)
Pages: 13pages
Date: 2007-01
New Economics Papers: this item is included in nep-env, nep-ind and nep-pbe
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Persistent link: https://EconPapers.repec.org/RePEc:kyo:wpaper:628

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