Competitive Permit Markets and Vertical Structures: The Relevance of Imperfectly Competitive Eco-Industries

Abstract : Permit markets lead polluting firms to purchase abatement goods from an eco-industry which is often concentrated. This paper studies the consequences of this sort of imperfectly competitive eco-industry on the equilibrium choices of the competitive polluting firms. It then characterizes the second-best pollution cap. By comparing this situation to one of perfect competition, we show that Cournot competition on the abatement good market contributes not only to a nonoptimal level of emission reduction but also to a higher permit price, which reduces the production level. These distortions increase with market power, measured by the margin taken by the noncompetitive firms, and suggest a second-best larger pollution cap.
Type de document :
Article dans une revue
Journal of Public Economic Theory, Wiley, 2014, 16 (1), pp.69--95
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Contributeur : Elisabeth Lhuillier <>
Soumis le : jeudi 9 février 2017 - 16:40:02
Dernière modification le : jeudi 21 juin 2018 - 10:38:01

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  • HAL Id : hal-01463763, version 1

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Sonia Schwartz, Hubert Stahn. Competitive Permit Markets and Vertical Structures: The Relevance of Imperfectly Competitive Eco-Industries. Journal of Public Economic Theory, Wiley, 2014, 16 (1), pp.69--95. 〈hal-01463763〉

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