Pollution in strategic multilateral exchange: taxing emissions or trading on permit markets? - Archive ouverte HAL
Article Dans Une Revue Bulletin of Economic Research Année : 2023

Pollution in strategic multilateral exchange: taxing emissions or trading on permit markets?

Ludovic A. Julien
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Anicet Kabre
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Résumé

We introduce polluting emissions in a sequential noncooperative oligopoly model of bilateral exchange. In one sector a leader and a follower use polluting technologies which create negative externalities on the payoffs of strategic traders who belong to the other sector. By modeling emissions as a negative externality, we show that the leader pollutes more (less) than the follower when strategies are substitutes (complements). Then, we consider the implementation of public policies to control the levels of emissions, namely two taxation mechanisms and a permit market. We study the effects of these public policies. Moreover, we determine the conditions under which these public policies can implement a Pareto-improving allocation.

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Dates et versions

hal-03791673 , version 1 (29-09-2022)

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Ludovic A. Julien, Anicet Kabre, Louis de Mesnard. Pollution in strategic multilateral exchange: taxing emissions or trading on permit markets?. Bulletin of Economic Research, 2023, 75 (3), pp.717-741. ⟨10.1111/boer.12378⟩. ⟨hal-03791673⟩
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