Pollution Tax under Lobbying Duopolists

Satoshi Honma

No 22, Discussion Papers from Kyushu Sangyo University, Faculty of Economics

Abstract: We study a model which explains a politically determined pollution tax outcome under asymmetric duopoly. We assume an asymmetry of firms in the pollution emissions per unit of output. The polluting duopoly and three-stage political game are considered. We derive the equilibrium tax rate and show that it might excess the marginal external damages, even without an environmental group. The politically determined tax rate is decomposed to the marginal external damages, the imperfect competition effect, and the lobbying effect. Under linear demand and cost functions, we derive the condition that Pigouvian taxation is politically determined. The effect on the equilibrium tax of firm heterogeneity is discussed.

Keywords: Cournot duopoly; firm heterogeneity; lobbying activity; political economy; pollution tax (search for similar items in EconPapers)
JEL-codes: H23 L13 Q58 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2005-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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