Endogenous timing in private and mixed duopolies with emission taxes

This paper examines an endogenous timing game in product differentiated duopolies under price competition when emission tax is imposed on environmental externality. We show that a simultaneous-move (sequential-move) outcome can be an equilibrium outcome in a private duopoly under significant (insign...

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Bibliographic Details
Published inJournal of economics (Vienna, Austria) Vol. 124; no. 2; pp. 175 - 201
Main Authors Lee, Sang-Ho, Xu, Lili
Format Journal Article
LanguageEnglish
Published Vienna Springer 01.06.2018
Springer Vienna
Springer Nature B.V
Subjects
Duopoly
Economic models
Economic theory
Economic Theory/Quantitative Economics/Mathematical Methods
Economics
Economics and Finance
Emissions
Endogenous
Equilibrium
Externality
Game Theory
Leadership
Macroeconomics/Monetary Economics//Financial Economics
Microeconomics
Privatization
Public Finance
Social and Behav. Sciences
Taxation
Timing
Welfare
Q2
D6
L5
Endogenous timing
Private duopoly
Emission tax
Mixed duopoly
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Summary:This paper examines an endogenous timing game in product differentiated duopolies under price competition when emission tax is imposed on environmental externality. We show that a simultaneous-move (sequential-move) outcome can be an equilibrium outcome in a private duopoly under significant (insignificant) environmental externality, but this result can be reversed in a mixed duopoly. We also show that when environmental externalities are significant, public leadership yields greater welfare than private leadership, and that public leadership is more robust than private leadership as an equilibrium outcome. Finally, we find that privatization can result in a public leader becoming a private leader, but this worsens welfare.
ISSN:0931-8658
1617-7134
DOI:10.1007/s00712-017-0565-1