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The timing of environmental tax policy with a consumer-friendly firm

Mariel Leal, Arturo Garcia and Sang-Ho Lee ()

MPRA Paper from University Library of Munich, Germany

Abstract: This study considers a Cournot duopoly model with a consumer-friendly firm and analyzes the interplay between the strategic choice of abatement technology and the timing of government’s commitment to the environmental policy. We show that the optimal emission tax under committed policy regime is always higher than that under non-committed one, but both taxes can be higher than marginal environmental damage when the consumer-friendliness is high enough. We also show that the non-committed policy will induce not only more outputs and higher profits but also more abatement and less emissions when the consumer-friendliness is high and the efficiency of abatement technology is not so high. Thus, the emergence of a consumer-friendly firm might yield better outcomes to both welfare and environmental quality without the commitment to the environmental policy.

Keywords: abatement technology; commitment; consumer-friendly firm; environmental policy; emission tax (search for similar items in EconPapers)
JEL-codes: L13 L31 Q58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene, nep-env and nep-reg
Date: 2018-03-03
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https://mpra.ub.uni-muenchen.de/85393/1/MPRA_paper_85393.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/85734/1/MPRA_paper_85393.pdf revised version (application/pdf)

Related works:
Journal Article: THE TIMING OF ENVIRONMENTAL TAX POLICY WITH A CONSUMER-FRIENDLY FIRM (2018) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:85393

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