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

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 envir...

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Bibliographic Details
Published in:Letters in spatial and resource sciences 2021-08, Vol.14 (2), p.197-209
Main Author: Garella, Paolo G.
Format: Article
Language:English
Subjects:
Agricultural Economics
Averages
Campaigns
Consumers
Demography
Duopoly
Economics
Economics and Finance
Environmental Economics
Environmental protection
Environmental quality
Externality
Geographical Information Systems/Cartography
Landscape/Regional and Urban Planning
Original Paper
Profits
Regional/Spatial Science
Subsidies
Taxation
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Summary: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.
ISSN:1864-4031
1864-404X
DOI:10.1007/s12076-021-00272-7