The Korean Economic Review
Effects of Mixed Oligopoly and Emission Taxes on the Market and Environment
Woohyung Lee (Keimyung Univ.) , Tohru Naito (Doshisha Univ.) and Ki-Dong Lee (Keimyung Univ.)Year 2017Vol. 33No. 2
Abstract
The literature has mainly focused on the optimal emission tax rate to internalize thenegative externalities of pollutants. Thus, we investigate firms’ technology adoptionbehavior under an emission taxation system. We also examine the possibility of using awelfare-maximizing public firm with eco-friendly production technology to reduceenvironmental damage. Private firms can choose clean or normal technology for theirproduction process. The analysis indicates several main results. First, under the emissiontaxation system, private firms adopt clean technologies even though they bear additionalabatement costs in the production process if environmental damage caused by theirproduction process is large. Second, mixed oligopoly is socially desirable whenenvironmental damage is low. Thus, private firms take normal technology. Finally, whenprivate firms adopt clean technology, mixed oligopoly is better than emission taxes ifenvironmental damage is low and if the market is less competitive from a social welfareperspective.