Environmental taxation and mergers in oligopoly markets with product differentiation

Mahelet G. Fikru, Luis Gautier

Research output: Contribution to journalArticle

Abstract

We analyze the effect of mergers on optimal environmental taxation in a Cournot oligopoly market with product differentiation. Our result indicates that the adjustment in emission tax crucially depends on the post-merger output distortion and pollution intensities. Specifically, we find that the optimal emission tax increases post-merger as long as pollution intensity of firms is higher and output distortion smaller post-merger than pre-merger. Furthermore, our result suggests that there is no need to revise environmental policy in markets where pollution intensity of firms does not change post-merger and (i) products are completely differentiated, or (ii) there are many firms for any degree of product differentiation.

Original languageEnglish (US)
Pages (from-to)1-21
Number of pages21
JournalJournal of Economics/ Zeitschrift fur Nationalokonomie
DOIs
StateAccepted/In press - Feb 14 2017

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Mergers
Pollution
Oligopoly
Environmental policy

Keywords

  • Carbon tax
  • Emission tax
  • End-of-the-pipe abatement
  • Mergers and acquisitions
  • Output distortion
  • Pollution intensity

ASJC Scopus subject areas

  • Business, Management and Accounting(all)
  • Economics and Econometrics

Cite this

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