Environmental taxes in a public Stackelberg leader duopoly

Ferreira, Fernanda A.; Ferreira, Flávio

http://hdl.handle.net/10400.22/4597

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Authors

Ferreira, Fernanda A.

Ferreira, Flávio

Abstract(s)

We study whether privatization of a public ﬁrm improves (or deteriorates) the environment in a mixed Stackelberg duopoly with the public ﬁrm as the leader. We assume that each ﬁrm can prevent pollution by undertaking abatement measures. We get that, since in the mixed market the industry output is higher than in the private market, the abatement levels are also higher in the mixed market, and, thus, environmental tax rate in the mixed duopoly is higher than that in the privatized duopoly. Furthermore, the environment is more damaged in the mixed than in the private market. The overall effect on the social welfare is that it will becomes higher in the private than in the mixed market.