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JOINT VENTURES, POLLUTION AND ENVIRONMENTAL POLICY
Author(s) -
Roy Chowdhury Indrani
Publication year - 2008
Publication title -
bulletin of economic research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.227
H-Index - 29
eISSN - 1467-8586
pISSN - 0307-3378
DOI - 10.1111/j.1467-8586.2007.00271.x
Subject(s) - cournot competition , duopoly , joint venture , economics , competition (biology) , microeconomics , market structure , joint (building) , pollution , outcome (game theory) , industrial organization , commerce , architectural engineering , ecology , engineering , biology
We examine the impact of emission taxes on the pollution level in a duopoly framework with endogenous market structure. We demonstrate that an increase in emission taxes could trigger a regime switch from joint ventures to Cournot competition, causing the pollution level to increase . Such a phenomenon is likely to happen when the concerned industry is reasonably profitable, and the synergistic gain between joint venture partners is not too strong. Moreover, emission taxes can implement the first best outcome if and only if the industry is not too polluting. In case it is, the second best level of taxes may or may not equal the optimal tax under either joint venture or Cournot competition.