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Vertical integration and first‐mover advantages in environmental taxes
Author(s) -
BárcenaRuiz Juan Carlos,
Campo María Luz
Publication year - 2020
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.3157
Subject(s) - vertical integration , value (mathematics) , business , set (abstract data type) , pollution , first mover advantage , industrial organization , economics , natural resource economics , ecology , machine learning , computer science , biology , programming language
This paper analyzes whether vertical integration between firms and suppliers encourages governments to behave as leaders in environmental policies. To study this issue, we consider transboundary pollution and two countries, with one firm in each country. We find that whether governments prefer to be leaders or followers in environmental taxes depends on two factors: whether firms are vertically integrated or not and the degree to which environmental pollution spills over to trading partners. When this overspill takes an intermediate value, taxes are set sequentially under vertical integration, but they are set simultaneously without it.