Abstract
| Language | English |
|---|---|
| Journal | Manchester School |
| Early online date | 25 Jun 2012 |
| DOIs | |
| Publication status | Published - 2013 |
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Keywords
- oligopolies
- environmental regulation
- emission permits
Cite this
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Emission permits trading and downstream strategic market interaction. / De Feo, Giuseppe; Resende, Joana; Sanin, Maria Eugenia.
In: Manchester School, 2013.Research output: Contribution to journal › Article
TY - JOUR
T1 - Emission permits trading and downstream strategic market interaction
AU - De Feo, Giuseppe
AU - Resende, Joana
AU - Sanin, Maria Eugenia
PY - 2013
Y1 - 2013
N2 - This paper studies inefficiencies arising in oligopolies subject to environmental regulation based on tradable emission permits. We propose a duopoly model of upstream–downstream strategic competition: in the permits market a leader sets the price, whereas in the output market Cournot competition occurs. We find that strategic interaction in the output market gives rise to an additional distortion in the permits market where both firms adopt ‘rival's cost-rising’ strategies to gain a competitive advantage in the output market. As a result, the price of permits is always higher than firms' marginal abatement costs.
AB - This paper studies inefficiencies arising in oligopolies subject to environmental regulation based on tradable emission permits. We propose a duopoly model of upstream–downstream strategic competition: in the permits market a leader sets the price, whereas in the output market Cournot competition occurs. We find that strategic interaction in the output market gives rise to an additional distortion in the permits market where both firms adopt ‘rival's cost-rising’ strategies to gain a competitive advantage in the output market. As a result, the price of permits is always higher than firms' marginal abatement costs.
KW - oligopolies
KW - environmental regulation
KW - emission permits
UR - http://www.scopus.com/inward/record.url?scp=84881664843&partnerID=8YFLogxK
U2 - 10.1111/j.1467-9957.2012.02310.x
DO - 10.1111/j.1467-9957.2012.02310.x
M3 - Article
JO - Manchester School
T2 - Manchester School
JF - Manchester School
SN - 1463-6786
ER -