Environmental Taxation and Mergers in Oligopoly Markets with Product Differentiation

Author

Mahelet G. Fikru, Missouri University of Science and TechnologyFollow
Luis Gautier

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.

Recommended Citation

Fikru, M. G., & Gautier, L. (2017). Environmental Taxation and Mergers in Oligopoly Markets with Product Differentiation. Journal of Economics/ Zeitschrift fur Nationalokonomie, 122(1), pp. 45-65. Springer-Verlag Wien.

The definitive version is available at https://doi.org/10.1007/s00712-017-0531-y

Department(s)

Economics

Keywords and Phrases

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

International Standard Serial Number (ISSN)

0931-8658; 1617-7134

Document Type

Article - Journal

Document Version

Citation

File Type

text

Language(s)

English

Rights

© 2017 Springer-Verlag Wien, All rights reserved.

Publication Date

01 Sep 2017