In a horizontally differentiated duopoly, a green attribute (environmental quality) can be added to the products. Average green quality generates a positive externality entering the Government’s objective function (and possibly consumers’ utility). A tax on the “dirtiest” product decreases its environmental quality but it increases that of the cleaner rival enough to imply an average quality increase, achieving environmental protection. The same holds for a subsidy to production targeted to the cleanest producer. A generic quality-related subsidy also increases the positive externality, increases profits of the greenest and lowers those of the dirtiest producer. Education campaigns by the Government also increase average green quality.

The effects of taxes and subsidies on environmental qualities in a differentiated duopoly / P.G. Garella. - In: LETTERS IN SPATIAL AND RESOURCE SCIENCES. - ISSN 1864-4031. - 14:2(2021), pp. 197-209. [10.1007/s12076-021-00272-7]

The effects of taxes and subsidies on environmental qualities in a differentiated duopoly

P.G. Garella
2021

Abstract

In a horizontally differentiated duopoly, a green attribute (environmental quality) can be added to the products. Average green quality generates a positive externality entering the Government’s objective function (and possibly consumers’ utility). A tax on the “dirtiest” product decreases its environmental quality but it increases that of the cleaner rival enough to imply an average quality increase, achieving environmental protection. The same holds for a subsidy to production targeted to the cleanest producer. A generic quality-related subsidy also increases the positive externality, increases profits of the greenest and lowers those of the dirtiest producer. Education campaigns by the Government also increase average green quality.
Product differentiation; Oligopoly; Environmental externality; Positive externality; Waste reduction; Green tax; Green subsidies
Settore SECS-P/01 - Economia Politica
Settore SECS-P/02 - Politica Economica
25-ago-2021
Article (author)
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/2434/870452
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