Paper #335

Título:

The adverse effects of environmental policy in green markets

Autores:

José L. Moraga y Noemí Padrón

Fecha:

Noviembre 1998

Resumen:

We model green markets in which purchasers, either firms or consumers, have higher willingness-to-pay for less polluting goods. The effectiveness of pollution reduction policies is examined in a duopoly setting. We show that duopolists' strategic behaviour may increase pollution levels. Maximum emission standards, commonly used in green markets, improve the environmental features of products. Nonetheless, overall pollution levels will rise because government regulation also affects market shares and boots firms' sales. Consequently, social welfare may be reduced. We also explore the effects of technological subsidies and product charges, including differentiation of charges.

Palabras clave:

Emission standards, subsidies, product charges, vertically differentiated duopoly

Códigos JEL:

L52, Q28

Área de investigación:

Economía Laboral, Pública, de Desarrollo y de la Salud

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