equilibria in unidirectional spatial models abstract this paper a characterizes the unique nash equilibrium of the unidirectional hotelling downs game in which firms maximize their market shares for any distribution of the consumers and b analyzes equilibrium behavior in the variation of the game in which each firm aims to secure a larger market share than its competitor in the first case firms employ identical mixed strategies and each of them serves in expected terms a fraction 1 e of the market and in both cases no firm ever locates in a position to the left of the first quartile of the consumers distribution

equilibrium properties of auctions and alternative procedures for allocating transferable permits abstract this paper examines the equilibrium properties of a range of auctions and related procedures placing emphasis on the types of procedures that are likely to be of special interest in environmental management applications nash equilibrium properties are first derived for a very general class of auctions for multiple homogeneous or heterogeneous objects or permits next it is shown that given appropriate assumptions three broad classes of public allocation procedures that do not generate revenues for the government would yield participants equal expected profits these classes are 1 incentive compatible auctions where bidders receive equal lump sum refunds 2 non incentive compatible procedures where refunds are a function of participants bids and 3 free initial distribution of permits on a lump sum basis followed by trading via a competitive market the applicability of the general results is then demonstrated by examining the particular non incentive compatible fair division procedure originally suggested by knaster finally implications of the theoretical results for applications including the allocation of transferable discharge permits and water rights are discussed

marketable pollution permits in oligopolistic markets with transaction costs in this paper we present a variational inequality framework for the modeling qualitative analysis and computation of equilibrium patterns in multiproduct multipollutant oligopolistic markets with marketable pollution permits in the presence of transaction costs the model deals explicitly with spatial differentiation and also guarantees that the imposed environmental quality standards are met through the initial allocation of licenses an algorithm is proposed with convergence results to compute the profit maximized quantities of the oligopolistic firms products and the quantities of emissions along with the equilibrium allocation of licenses and their prices numerical examples are included to illustrate this approach

market power permit allocation and efficiency in emission permit markets market power in permit markets has been examined in some detail following the seminal work of hahn q j econ 99 4 753 765 1984 but the effect of free allocation on price manipulation with market power in both product and permit market has not been fully addressed i show that in this case the threshold of free allocation above which a dominant firm will set the permit price above its marginal abatement costs is below its optimal emissions in a competitive market and that overall efficiency cannot be achieved by means of permit allocation alone in addition to being of general economic interest this issue is relevant in the context of the eu ets i find that the largest german uk and nordpool power generators received free allowances in excess of the derived threshold conditional on having price setting power in both the electricity and permit markets these firms would have found it profitable to manipulate the permit price upwards despite being net permit buyers

ethical influences on the evolution of the us tradable permit approach to air pollution control abstract in 1975 a novel approach to air pollution control was implemented in the usa from this rather humble beginning this approach has now been expanded rather dramatically in several different directions this paper describes this evolution shows how the design of the system has been adapted to accommodate ethical concerns and describes how the latest versions of this approach have transformed the regulatory process which spawned the approach in the first place

firm behaviour under pollution ratio standards with non compliance this paper compares a firm s short run optimal production and abatement rules under emission level standards and standards expressed in terms of emissions per unit of output ratio standards the models allow for non compliance with standards with expected penalties dependant on either level or relative violations of the standard in question it is shown that ratio arguments make a difference to the optimal decision rules derived for a profit maximising firm for example for a given level of emissions the firm both produces more and abates more under a ratio standard so that ratio and level standards cannot be used interchangeably to achieve the same combination of emissions and output the implications for the efficiency of pollution control are briefly discussed

regulation and evolution of compliance in common pool resources the evolution of compliance with regulation and the evolution of a cpr stock are modeled jointly in a setup where replicator dynamics describing compliance with harvesting rules are combined with resource stock dynamics this evolutionary approach suggests that in long run equilibrium coexistence of both cooperative and non cooperative rules is possible under regulation stock effects on profits and a certain structure of auditing probabilities could imply the emergence of a limit cycle in areas of low stock levels as an equilibrium outcome it might be easier for the regulator to obtain full compliance under precommitment to fixed auditing probabilities

an optional permit system for global pollution control abstract this paper describes an optional permit system to control global environmental pollution the proposed scheme serves as an appropriate incentive to induce each country to adopt globally optimal behavior under asymmetric information where some world agency has no information about the pollution production functions of countries

the exercise of market power in laboratory experiments douglas d davis and charles a holt march 1998 introduction many aspects of antitrust policy are influenced by the possibility that sellers in concentrated markets may have the power to raise prices above competitive levels of course anyone can raise price so the issue is whether a change in structure e g a merger will allow one or more sellers to raise price profitably a price increase by one seller diverts sales to others so a firm is more likely to have market power when its competitors have limited capacity to expand their sales thus a merger that reduces competitors capacity may create market power in laboratory experiments any treatment that reassigns units of capacity from one seller to another may create or destroy market power even if the aggregate supply curve is unchanged for example giving one seller a relatively large endowment of infra marginal low cost units may make it less risky for this seller to raise price and forego the sale of high cost units thus it is not surprising that experiments with apparently similar supply and demand structures may yield different price outcomes as discussed below there are a number of other ways in which structural changes can affect the degree of power that sellers enjoy market power can also be sensitive to the trading institution and this is the context that power issues first arose in experimental economics for example the public posting of uniform prices in a posted offer auction eliminates the incentive to offer discounts on marginal units that arises in a double auction in fact smith 1981 found that even monopolists are sometimes unable to maintain prices above competitive levels in double auctions whereas supra competitive prices are the norm in postedoffer monopolies similarly holt langan and villamil 1986 found that sellers in concentrated double auctions were sometimes able to raise prices but that prices fell to competitive levels in about half of the sessions despite the high concentration of seller capacity davis and williams 1991 replicated the holt langan and villamil results for double auctions and then used the same market

what can we learn from the grand policy experiment lessons from so2 allowance trading stable url http links jstor org sici sici 0895 3309 28199822 2912 3a3 3c69 3awcwlft 3e2 0 co 3b2 tthe journal of economic perspectives is currently published by american economic association your use of the jstor archive indicates your acceptance of jstor s terms and conditions of use available athttp www jstor org about terms html jstor s terms and conditions of use provides in part that unless you have obtainedprior permission you may not download an entire issue of a journal or multiple copies of articles and you may use content inthe jstor archive only for your personal non commercial use please contact the publisher regarding any further use of this work publisher contact information may be obtained athttp www jstor org journals aea html each copy of any part of a jstor transmission must contain the same copyright notice that appears on the screen or printedpage of such transmission the jstor archive is a trusted digital repository providing for long term preservation and access to leading academicjournals and scholarly literature from around the world the archive is supported by libraries scholarly societies publishers and foundations it is an initiative of jstor a not for profit organization with a mission to help the scholarly community takeadvantage of advances in technology for more information regarding jstor please contact support jstor org http www jstor orgtue jun 26 16 25 17 2007

quality competition and environmental damage is there a role for network preferences abstract we consider from a theoretical and empirical viewpoint how network preferences of consumers which differ in their willingness to pay wtp for green goods affect the equilibrium configuration of a vertically differentiated duopoly when a cleaner firm competes against a dirtier rival we find that a trade off can emerge between emissions abatement and the catching up process of the dirtier firm can emerge in particular emissions decrease only when consumers with low wtp have network preferences still in this case only the cleaner firm has an incentive to improve its environmental quality along the quality ladder while the laggard firm is tied to its backward profile these theoretical predictions are empirically tested by exploiting the duality of italy s economy with high income citizens mainly concentrated in northern regions while low income citizens are largely located in the south we adopt a fixed effects spatial error model at the provincial level to relate variables on firms environmental management system with citizens environmental behaviour proxied by the recycling rate overall the empirical estimates are in line with the theoretical predictions from the empirical analysis it emerges that consumers environmental behaviour positively affects enterprises future environmental choices moreover firms have a stronger incentive to raise their environmental quality when low income consumers namely those buying dirtier variants internalise the network effect

dynamic duopoly with congestion effects abstract we analyze duopolistic competition between horizontally differentiated firms selling durable goods or services subject to congestion at each point of time new customers buy one unit of the commodity from one of the firms by comparing present prices and future congestion rates we study the linear markov equilibrium of this game which exists and is unique when firms are not too different the existence of negative consumption externalities is shown to soften the price competition moreover we show that the firm with the larger capacity has at the steady state a larger market share a higher price and a lower congestion rate the price of an entrant decreases gradually after entry while the price of the incumbent rises the faster the speed of convergence to the steady state is the stronger is the congestion effect

some economics of global warming the greenhouse effect itself is simple enough to understand and is not in any real dispute what is in dispute is its magnitude over the coming century its translation into changes in climates around the globe and the impacts of those climate changes on human welfare and the natural environment these are beyond the professional understanding of any single person the sciences involved are too numerous and diverse demography economics biology and the technology sciences are needed to project emissions atmospheric chemistry oceanography biology and meteorology are needed to translate emissions into climates biology agronomy health sciences economics sociology and glaciology are needed to identify and assess impacts on human societies and natural ecosystems and those are not all there are expert judgments on large pieces of the subject but no single person clothed in this panoply of disciplines has shown up or is likely to this article makes an attempt to forecast the economic and social consequences of global warming due to anthropogenic greenhouse gases and attempting to prevent it

congestion reducing investments and economic welfare in a hotelling model abstract we investigate optimal quality provision where quality is determined by congestion duopolists make congestion reducing investments and then compete in prices we find that an unregulated market leads to insufficient investment and that price cap below the equilibrium price eliminates this inefficiency

auctions or grandfathering the political economy of tradable emission permits despite the prevalence of grandfathered permits we still observe that a hybrid policy in which a fraction of initial emission permits is distributed through auctions is adopted in some cases we also observe that some polluting industries support auctioned permits and that most environmental groups support grandfathered permits this paper attempts to explain these phenomena from the perspective of political economy and investigates the conditions under which grandfathering auctions or a hybrid instrument will be the equilibrium policy by constructing a two stage lobbying game in which the type of policy instrument auction grandfathering or a hybrid instrument is determined in the first stage and then the number of permits is decided in the second stage we highlight the strategic interaction of the lobbying activities between the two stages in explaining the behavior of the lobbying groups

the regulatory choice of noncompliance in emissions trading programs this paper addresses the following question to achieve a fixed aggregate emissions target cost effectively should emissions trading programs be designed and implemented to achieve full compliance or does allowing a certain amount of noncompliance reduce the costs of reaching the emissions target the total costs of achieving the target consist of aggregate abatement costs monitoring costs and the expected costs of collecting penalties from noncompliant firms under common assumptions i show that allowing noncompliance is cost effective only if violations are enforced with an increasing marginal penalty however one can design a policy that induces full compliance with a constant marginal penalty that meets the aggregate emissions target with lower expected costs this last result does not depend on setting an arbitrarily high constant marginal penalty in fact the marginal penalty need not be higher than the equilibrium marginal penalty under the policy with the increasing marginal penalty and can actually be lower finally tying the marginal penalty directly to the permit price allows the policy objective to be achieved without any knowledge of firms abatement costs

a measure of horizontal inequity politicians academicians and the general public alike have perceived that the status quo tax and transfer legislation creates inequities among living units tax laws create numerous situations in which living units with seemingly equal abilities to pay are taxed quite different amounts state by state differences in welfare eligibility rules benefit schedules and administrative procedures the general unavailability of cash welfare to childless nonaged healthy couples and single individuals and other features of transfer programs similarly provide vastly different levels of income support to units with equal needs advocates of major tax and welfare reform have marshalled such evidence into a central argument in favor of their proposals while there is wide agreement that the process of redistributing incomes abounds with inequities there have been few attempts to quantify their extent 2 this paper develops a measure of horizontal inequity and illustrates its use section ii discusses the concept of horizontal equity then builds upon familiar lorenz curve gini coefficient analysis to derive the inequity index the third part considers some problems of implementing the measure and illustrates it section iv provides a short conclusion

progressivity horizontal equity and reranking in health care finance a decomposition analysis for the netherlands this paper employs the method of aronson et al 1994 to decompose the redistributive effect of the dutch health care financing system into three components a progressivity component a classical horizontal equity component and a reranking component results are presented for the health care financing system as a whole as well as for its constituent parts a final section sets out to uncover the relative importance in terms of their effects on progressivity horizontal equity and reranking of the key institutional features of one component of the dutch system the awbz social insurance scheme

equity equality and welfare this paper argues that horizontal equity he and vertical equity ve are two of the basic commands of social justice and can be seen as hierarchical the information content of the ve command is sufficient also to implement he a general vector specification of inequity is proposed for a tariff treatment system which does not satisfy he and ve in the case of the income tax the distinction between the he and ve commands and the nr no reranking criterion which has coexisted in the income tax literature with these for the last 15 years is drawn a complication not recognised by he and ve is the effect of pursuing the common interest efficiency goal of the tariff the paper concludes with a call for further work on the meaning and implementation of concepts of justice in direct taxation and on the common interest dimension

hotelling bertrand duopoly competition under firm specific network effects abstract social pressure plays a crucial role in consumer choices the impact of network social effects has also been largely recognised in the context of market competition in this paper we consider a duopoly where competing firms are differentiated solely by the level of social or network externality they induce on consumers perceived utility we fully characterise nash equilibria in locations prices and market shares under a scenario of weak social externality firms opt for maximum differentiation and the firm with the highest social recognition enjoys a relative advantage in terms of profit this outcome is not the only possible we formally prove that large values of social recognition may lead to adverse coordination among consumers and move the strongest firm out of the market with positive probability this scenario is related to a pareto inefficient trap of no differentiation

strategic state level environmental policy with asymmetric pollution spillovers this paper examines the strategic behavior of state level utility regulators in the context of the federal tradable emissions permits market when state to state pollution spillovers are asymmetric strategic behavior is possible because a state s environmental policy indirectly affects the price of permits and therefore abatement in other states we show that the optimal pollution penalty is comprised of two parts i a pigouvian tax adjusted for state to state spillovers and ii an optimal tariff designed to improve the terms of trade in permits generally abatement costs are not minimized and the outcome is pareto inefficient regardless of the size of the market 2001 elsevier science b v all rights reserved

network effects aftermarkets and the coase conjecture a dynamic markovian approach this paper investigates the expansion of the network of a monopolist firm that produces a durable good and is also involved in the corresponding aftermarket we characterize the markov perfect equilibrium of the continuous time dynamic game played by the monopolist and the forward looking consumers under the assumption that consumers benefit from the subsequent expansion of the network the paper contributes to the theoretical discussion on the validity of the coase conjecture analyzing whether coase s prediction that the monopolist serves the market in a twinkling of an eye remains valid in our setup we conclude that the equilibrium network development may actually be gradual contradicting coase s conjecture we find that a necessary condition for such a result is the existence of aftermarket network effects that accrue at least partly to the monopolist firm

product differentiation under congestion hotelling was right i introduction nobody goes there anymore it s too crowded attributed to yogi berra in the seminal hotelling 1929 model of spatial competition two firms compete to sell a product in stage 1 they locate along a unit line in stage 2 they set their prices consumers spread evenly along the line choose the best deal based on the posted price and linear transportation costs hotelling apparently solved for the stage 2 equilibrium in pure strategy prices and via backward induction showed that regardless of location either firm would increase its profits by moving closer to its competitor see figure 1 first line this gave rise to the principle of minimum differentiation the tendency of competing firms to make similar choices in geographical or product characteristic dimensions d aspremont gabszewicz and thisse 1979 critiqued this principle s validity within the hotelling model they showed that no pure strategy pricing equilibrium exists when the firms are sufficiently close together but not at the same location this is because for firms at close quarters the temptation is strong for one firm to cut its price just enough to steal the entire mass of customers located on the other side of its competitor in fact if locations are symmetric the hotelling pricing equilibrium exists only if firms locate in the outer quartiles thus hotelling s backward induction breaks down and there is no guarantee that firms located in the inner quartiles would want to move closer to each other see figure 1 second line at this point the literature diverges much of the literature follows d aspremont gabszewicz and thisse 1979 who introduce quadratic transportation costs and show that they provide greater tractability 1 with quadratic costs the differentiation result is reversed firms maximally differentiate in equilibrium 2 figure 1 omitted osborne and pitchik 1987 continue with hotelling s linear transportation costs despite the tractability challenges they characterize a mixed strategy pricing equilibrium when firms are located close to each other in the symmetric subgame perfect equilibrium with pure location choices that they compute both firms locate at the edges of the inner quartiles 0 24 of the distance from the midpoint see figure 1 third line thus substantial near efficient differentiation remains in equilibrium evidently firms incentives are to move farther apart over much of the region where hotelling s pricing equilibrium fails to exist this paper also retains linear transportation costs and adds one feature to the model negative network externalities specifically consumers are assumed to derive disutility in proportion to the number of customers of the firm they patronize this negative externality can be interpreted as congestion arising from firm capacity constraints queuing for parking customer service or to pay 3 in many cases the more crowded a store or restaurant the less attractive it is to patronize all else equal it can also be interpreted as a specific kind of snobbery which we term brand snobbery preferring the brand less consumed 4 we find that the greater are congestion costs relative to transportation costs the more of hotelling s line contains a hotelling like pure strategy pricing equilibrium the centered interval where the equilibrium does not exist for symmetrically located firms shrinks as congestion costs grow in importance and in the limit vanishes that is the hotelling pricing equilibrium can be supported at any location where the firms are located on opposite sides of the midpoint given sufficiently high congestion costs relative to transportation costs this result has implications for product differentiation in essence congestion costs extend the portion of the line over which hotelling logic applies that is over which firms can increase profits by moving closer to each other

environmental and resource economics a canadian retrospective the paper reviews research contributions to environmental and resource economics by scholars in canada we focus mainly on work from the past 25 years but also highlight earlier pathbreaking work we begin by looking at broad trends in research both internationally and within canada we then review canadian contributions to various topics in the field canadians have played a leading role in the development of the field especially in resource economics international environmental economics and the valuation of environmental amenities

stochastic pollution costly sanctions and optimality of emission permit banking abstract this paper identifies a new economic motive for pollution regulations that allow polluting firms to bank and borrow emission permits over time when aggregate pollution is stochastic an intertemporal permit trading regime can provide firms with efficient incentives for pollution abatement without the need for costly government enforcement actions that would otherwise be required

what s in a sign trademark law and economic theory the aim of this paper is to summarize the extant theory as it relates to the economics of trademark and to give some suggestions for further research with reference to distinct streams of literature the proposed line of study inevitably looks at the complex relationship between signs and economics copyright 2006 the authors journal compilation 2006 blackwell publishing ltd

free trade and global warming a trade theory view of the kyoto protocol this paper demonstrates how three important results in environmental economics true under mild conditions in closed economies are false or need serious amendment in a world with international trade in goods since the three results we highlight have framed much of the ongoing discussion and research on the kyoto protocol our viewpoint from trade theory suggests a re examination may be in order specifically we demonstrate that in an open trading world but not in a closed economy setting 1 unilateral emission reductions by the rich north can create self interested emission reductions by the unconstrained poor south 2 simple rules for allocating emission reductions across countries such as uniform reductions may well be efficient even if international trade in emission permits is not allowed and 3 when international emission permit trade does occur it may make both participants in the trade worse off and increase global emissions

environmental quality competition and taxation in the presence of green network effect among consumers we examine the impact of a green network effect in a market characterized by consumers environmental awareness and competition between firms in terms of both environmental quality and product prices the unique aspect of this model comes from the assumption that an increase in the number of consumers of green brown product increases the satisfaction of each green brown consumer we show that paradoxically when the network effect of a green product is higher than that of a brown product this externality reduces product environmental quality and raises consumption of the green product conversely when the network effect of the brown product is higher the externality improves product environmental quality and raises consumption of the brown product in both cases the network effect does not affect the overall pollution level the externality correction requires the use of three optimal fiscal policies an ad valorem tax on products an emission tax and a subsidy or a tax on the green purchase a second best optimum can also be reached through the green taxation

assessing the relative merits of development charges and transferable development rights in an uncertain world traditionally regulatory instruments have been used to achieve planning objectives however emerging market based policy instruments such as transferable development rights a quantity based app

tying compatibility and planned obsolescence according to the hypothesis of planned obsolescence a durable goods monopolist without commitment power has an excessive incentive to introduce new products that make old units obsolete and this reduces its overall profitability in this paper i reconsider the above hypothesis by examining the role of competition in a monopolist s upgrade decision i find that when a system add on is competitively supplied a monopolist chooses to tie the add on to a new system that is only backward compatible even if a commitment of not introducing the new system is available and socially optimal tying facilitates a price squeeze

a note on dynamic monopoly pricing under consumption externalities we analyze dynamic monopoly pricing under consumption externalities focusing on pricing under negative externalities we also attempt to generalize models in the previous literature which encompass both negative and positive externalities by incorporating a consumer s discount factor for past sales as a parameter analyzing our model reveals oscillation as the optimal price path in the presence of negative externalities

learning from the behavior of others conformity fads and informational cascades learning by observing the past decisions of others can help explain some otherwise puzzling phenomena about human behavior for example why do people tend to converge on similar behavior why is mass behavior prone to error and fads the authors argue that the theory of observational learning and particularly of informational cascades has much to offer economics business strategy political science and the study of criminal behavior

the emissions trading paradox abstract this article considers the price history of co2 allowances in the eu emission trading scheme since european emissions trading started in 2005 the prices of allowances have varied between less than one and thirty euro per ton of co2 this previously unpredicted volatility and more notably a significant price crash in may 2005 led to the hypothesis that electricity producers might use their market power to influence the prices of allowances besides market power the combination of information asymmetry and price interdependencies between prices of primary goods especially electricity and allowances plays an important role in explaining the emissions trading paradox the model presented will show that banking can lead to such a price crash if market participators act rationally furthermore in such a scenario banking can be profitable for sellers at the cost of buyers

a trading ratio system for trading water pollution discharge permits abstract the fact that water flows to the lowest level uni directionally is a very specific and useful property of water by utilizing this property we design a trading ratio system trs of tradable discharge permits for water pollution control such a trading ratio system has three main characteristics 1 the zonal effluent cap is set by taking into account the water pollutant loads transferred from the upstream zones 2 the trading ratios are set equal to the exogenous transfer coefficients among zones and 3 permits are freely tradable among dischargers according to the trading ratios this paper shows that the trs can take care of the location effect of a discharge and can achieve the predetermined standards of environmental quality at minimum aggregate abatement costs problems with hot spots and free riding can be avoided and the burdens on both dischargers and the environmental authority should be relatively light

dynamic models of religious conformity and conversion theory and calibrations abstract this paper develops overlapping generations models to explain and simulate changes in the proportion of secular and religious people the church is modeled as generating an externality associated with conformity enhancing education observed changes in the number of nonbelievers are explained by different birth rates among secular and religious parents and the relative proportion of young nonconformists calibrations for the conformity rates among secular and religious people show that the observed long run increase in the difference between percentage of secular people in europe and the united states can be attributed to lower conformity rates prevailing in europe

an international policy architecture for the post kyoto era in february 2005 the kyoto protocol to the united nations framework convention on climate change came into force but without participation by the united states its impacts on emissions of greenhouse gases including carbon dioxide co2 the primary anthropogenic driver of climate change will be trivial but scientific robert t watson 2001 and economic charles d kolstad and michael a toman 2001 analyses point to the need for a credible international approach because the kyoto protocol s ambitious targets apply only to the short term 2008 2012 and only to industrialized nations the agreement will impose relatively high costs and generate only modest short term benefits while failing to provide a real solution joseph e aldy et al 2003 for these reasons most economists see the agreement as deeply flawed richard n cooper 1998 david g victor 2001 warwick j mckibbin and peter j wilcoxen 2002 although some see it as an acceptable first step axel michaelowa 2003 virtually all agree however that the protocol is not sufficient to the overall challenge we describe the basic features of a postkyoto international global climate agreement which addresses three crucial questions who when and how the respective elements are first a means to ensure that key nations industrialized and developing are involved second an emphasis on an extended time path of action employing a cost effective pattern over time and third inclusion of market based policy instruments i who expand participation to include all key countries

further results on permit markets with market power and cheating abstract this paper examines a market for pollution permits in which one firm has market power and one or more firms is noncompliant i show that the firm with market power may choose to hold more permits than it needs effectively retiring permits from the market i also show that some noncompliance may be socially desirable because it can mitigate the distortion caused by market power similarly some degree of market power may be socially desirable because it can in turn mitigate the distortion caused by noncompliance

auction design for the allocation of emission permits in the presence of market power to the extent that emission permits have been allocated using market mechanisms this has been done using a sealed bid auction design typically with discriminatory prices however several authors have recommended the ascending auction format basically two competing ascending auction designs have been suggested the standard ascending auction with clock or demand schedules or an alternative ascending clock implementation of vickrey pricing the latter design was introduced as a response to problems of bid shading under the sealed bid and the standard ascending auction format the purpose of this paper is to investigate the allocation of permits under these two alternative mechanisms the auction process and the resulting market outcome in the presence of oligopolistic competition are simulated in this setting it is not obvious that bid shading is the optimal strategy under the standard design nor is it obvious that sincere bidding is the optimal strategy under the alternative ascending auction design the alternative auction format makes it less costly to pursue a strategy to increase market shares through the acquisition of emission permits thus increasing the competitor s costs leading to overbidding as the optimal strategy

the tradable permits approach to protecting the commons lessons for climate change tradable permit approaches for rationing access to the commons have been applied to many different types of resources in many different countries this essay reviews the experience with three main applications of tradable permit systems air pollution control water supply and fisheries management as well as some unique related programmes the purpose of the review is to draw together what we have learned about tradable permits in practice that might offer some useful insights for the implementation of the three tradable permit mechanisms that are part of the kyoto protocol copyright 2003 oxford university press

when and for whom would e waste be a treasure trove insights from a network equilibrium model of e waste flows electrical and electronic equipment waste e waste is growing fast due to its potential economic value as well as its possible negative impacts on the environment tracing e waste flow is a major concern for stakeholders of e waste management especially whether or not adequate amounts of electrical and electronic equipment waste weee flow into the designed recycling systems is a fundamental issue for sustainable operations in this paper we analyze how technical market and legislative factors influence the total amount of e waste that is collected recycled exported and legally and illegally disposed off we formulate the e waste network flow model as a variational inequality problem the results of the numerical examples highlight the importance of considering the interaction between the supply and the demand side for precious materials in policy decisions low collection rates of e waste lead to low profits for stakeholders and make it difficult to establish sustainable recycling operations increasing weee collection rates increases recyclers profits however it only increases smelters profits up to a certain limit after which smelters cannot benefit further due to limited demand for precious materials furthermore the results emphasize the importance of establishing international control regimes for weee flows and reveal possible negative consequences of the recent trend of dematerialization more precisely product dematerialization tends to decrease recyles and smelters profits as well as to increase the outflow of e waste from the designated recycling system authors abstract

enforcement and price controls in emissions trading this paper examines how enforcement affects the structure and performance of emissions trading programs with price controls under uncertainty about firms abatement costs the analysis highlights how an enforcement strategy can cause abatement cost risk to be transmitted to enforcement costs via the price of permits when this occurs accommodating the effect of abatement cost risk with an optimal policy results in higher expected emissions and lower expected permit price than their second best optimal values however it is possible to design an enforcement strategy that shields enforcement costs from abatement cost risk by tying sanctions directly to permit prices this enforcement strategy stabilizes enforcement effort the optimal permit supply and price controls are independent of enforcement costs and the policy produces the second best optimal outcome

the design of a dynamic tradeable quota system under market imperfections abstract market power within a dynamic system of tradeable quotas with banking and borrowing of quotas leads to a nonoptimal distribution of abatement across agents in this paper we introduce a quota system that may reduce the efficiency loss from market power and thereby result in a distribution of abatement across agents that is closer to a cost effective outcome however this system will in general lead to a nonoptimal distribution of abatement across periods hence we may face a trade off between a cost effective distribution of abatement across periods and reduced adverse effects of market power

abatement and permits when pollution is uncertain and violations are fined this paper considers a firm s choice of abatement and of the number of permits if actual pollution is stochastic such that full compliance cannot be ensured this straightforward extension induces non trivial and unexpected comparative static properties such as permits and abatement can be either substitutes or complements higher fines can lower the number of acquired permits or abatement and higher permit prices can reduce abatement yet integrating these reactions into a competitive permit market eliminates puzzling features this is an additional justification of tradable permits over standards where regulators must cope with potentially counterproductive firm reactions

end of pipe or cleaner production how to go green in presence of income inequality and pro environmental behavior in this paper we consider a vertically differentiated duopoly model in which a green producer competes with a brown rival in a market in which consumers are environmentally concerned in particular consumers are assumed to value not only the intrinsic quality of a certain product but also its environmental impact this environmental valuation has a positional content consumers attach a positive attribute to the green product while penalizing the brown one in this context we consider the choice of the green firm between cleaner and end of pipe abatement efforts we find that the interplay between the intensity of market competition consumers income disparity and environmental concern can play a crucial role in directing the green producer towards one or the other technological choice more precisely the adoption of cleaner production technologies can be discouraged by low average income and by tough competition while it can be spurred by the moral social incentive towards pro environmental behavior

price competition when consumer behavior is characterized by conformity or vanity it has long been recognized that the pleasure of consuming a good may be affected by the consumption choice of other consumers in some cases social pressures may lead to conformity in some others individuals may feel the need of exclusiveness under the form of vanity such externalities have proven to be important in several markets however the market implication of these externalities are still unclear to investigate them we propose to combine the consumption externality model and the spatial duopoly model when conformity is present but not too strong both firms remain in business but price competition is fiercer and results in lower prices the market share of the large firm increases with the population size as the population keeps rising the large firm may serve the entire market and set a price that has the nature of a limit price when conformity is strong enough different equilibria may exist in most of these equilibria a single firm captures the whole market at the other extreme when vanity is at work price competition is relaxed

multi sector model of tradable emission permits this paper presents a multi sector model of tradable emission permits which includes oligopolistic and perfectly competitive industries the firms in oligopolistic industries are assumed to exercise market power in the tradable permit market as well as in the product market specifically we examine the effects of the initial permit allocation on the equilibrium outcomes focusing on the interaction among these product and permit markets it is shown that raising the number of initial permits allocated to one firm in an oligopolistic industry increases the output produced by that firm under certain conditions raising a clean less polluting firm s share of the initial permits can lead to reductions in both the product and permit prices we discuss criteria for the socially optimal allocation of initial permits considering the trade off between production inefficiency and consumer benefit

tradable quota taxation and market power abstract we investigate how corrective taxation can improve the efficiency properties of tradable quota systems affected by market power indeed we show that when there is a dominant firm in the tradable quota market the regulator can set an ad hoc taxation on firms traded quotas that restores cost effectiveness without driving the dominant firm s net demand to zero achieving cost effectiveness with market power and quota taxation implies some costs in terms of tax revenue that however can be justified by the corresponding reduction of compliance costs moreover we see that there may be cases where all firms result to be better off after the implementation of corrective taxation

environmental regulation a value theoretic and class based analysis following a value theoretic and class based approach it is argued in this paper that ecological problems are inseparably linked to the process of extracting surplus value in capitalism and owing to their adverse impacts instigate struggles over the appropriation of nature these struggles fought within and outside the state by competing agents shape environmental regulation in particular taxes permits command and control measures and subsidies affect prices profits and rents and have class and other social implications evidence of current environmental regulation shows that it takes places under the great influence of capitalist concerns

social norms savings behavior and growth we argue that many goods and decisions are not allocated or made through markets we interpret an agent s status as a ranking device that determines how well he or she fares in the nonmarket sector the existence of a nonmarket sector can endogenously generate a concern for relative position in for example the income distribution so that higher income implies higher status moreover it can naturally yield multiple equilibria it is thus possible to explain differences in growth rates across countries without recourse to differences in underlying preferences technologies or endowments different social organizations lead to different reduced form preferences which lead to different growth rates

multi period pricing in the presence of competition and social influence abstract this paper examines single and dynamic pricing policies of two competing firms over two periods in the presence of social influence assuming two firms adopt the same pricing policy we find that under either pricing policy firm profits always decrease with the degree of social influence firms prefer dynamic pricing policy when social influence is either relatively weak or sufficiently strong for firms under dynamic pricing policy to set zero prices in the first period otherwise single pricing policy is more preferable the conclusions are similar when the market size varies over periods except that dynamic pricing policy is always more profitable if the market size in period 2 is sufficiently large we have further compared the two pricing policies with posted pricing policy the results show that dynamic pricing policy dominates when social influence is relatively weak while posted pricing policy dominates when social influence is sufficiently strong because of the synergy between social influence and the reference price effect finally when each firm freely chooses either single or dynamic pricing policy we find that if the degree of social influence is relatively small two asymmetric equilibria exist where two firms adopt different pricing policies if the degree of social influence is very large however the unique equilibrium is both firms adopting dynamic pricing policy these findings provide important implications for firms to make more informed pricing decisions in an increasingly competitive environment with strong social influence

marketable permits market power and cheating abstract in this paper we present a model of a noncompliant firm operating in a marketable pollution permit market in the main result of the paper we show how compliance is related to the initial distribution of permits a firm with market power will cheat less the larger its endowment of permits is from a fixed stock of permits the competitive fringe however will cheat more as its endowment of permits is reduced generating an ambiguous global impact on cheating

comparing households with different structures the problem of equity design of equitable tax and transfer schemes and analyses of the distribution of well being among members of society are complicated by the fact that households differ in structure during the 1970 s a major reexamination of the questions of optimal income tax progressivity and the horizontal equity of taxes has taken place following the seminal work of james mirrlees these analyses differ from earlier treatments of tax equity because of the recognition that individuals may value leisure time as well as income this reexamination of tax equity has for the most part assumed a world of identically structured households with only one potential worker the present paper surveys issues in tax equity and analyzes them allowing for one and two adult households which may differ in their work behavior

fishing quota markets abstract in 1986 new zealand responded to the open access problem by establishing the world s largest individual transferable quota itq system using a 15 year panel dataset from new zealand that covers 33 species and more than 150 markets for fishing quotas we assess trends in market activity price dispersion and the fundamentals determining quota prices we find that market activity is sufficiently high in the economically important markets and that price dispersion has decreased we also find evidence of economically rational behavior through the relationship between quota lease and sale prices and fishing output and input prices ecological variability and market interest rates controlling for these factors our results show a greater increase in quota prices for fish stocks that faced significant reductions consistent with increased profitability due to rationalization overall this suggests that these markets are operating reasonably well implying that itqs can be effective instruments for efficient fisheries management

market power and transferable property rights the appeal of using markets as a means of allocating scarce resources stems in large part from the assumption that a market will approximate the competitive ideal when competition is not a foregone conclusion the question naturally arises as to how a firm might manipulate the market to its own advantage this paper analyzes the issue of market power in the context of markets for transferable property rights first a model is developed that explains how a single firm with market power might exercise its influence this is followed by an examination of the model in the context of a particular policy problem the control of particulate sulfates in the los angeles region

utilitarianism and horizontal equity the case for random taxation this paper establishes that far from being able to derive the principle of horizontal equity from utilitarianism the principle is actually in consistent with utilitarianism in a variety of circumstances we derive conditions under which a it is optimal to impose random tax schedules ex post randomization and b it is optimal to randomize the tax schedules imposed on a set of otherwise identical individuals ex ante randomization the implications for optimal tax theory are discussed more generally it is shown that there are a number of potentially important economic situations with which the principle of horizontal equity may be inconsistent not only with utilitarianism but even with pareto optimality this abstract was borrowed from another version of this item

the kyoto protocol market power and enforcement the kyoto protocol aims to limit aggregate carbon emissions by participating countries to 1990 emissions levels in aggregate it also allows for the creation of a permit market in which countries will be able to buy and sell the right to emit carbon dioxide this paper investigates how market power held by the countries of the former soviet union and enforcement of the carbon emission limits might affect the abatement and the cost of compliance with the kyoto protocol to do so it uses a modified version of the van egteren weber 1996 model to investigate a permit market in the presence of both market power and enforcement difficulties it then simulates the model finding that if meeting abatement targets is the goal regulating the supply side of the market and convex fine schedules are the most effective tools

market power with interdependent demand sale of emission permits and natural gas from russia with implementation of the kyoto protocol russia will most likely be able to exert market power in the emission permit market but as russia is also a big exporter of fossil fuels the incentives to boost the permit price may be weak however a significant share of russia s fossil fuel exports is natural gas if a high permit price boosts the demand for natural gas through substitution from more polluting fuels and thus increase gas profits this may increase the incentives to exert monopoly power in the permit market moreover a large fossil fuel exporter may use its market position to influence the effective demand for permits hence the relationship between permit income and fossil fuels exports runs in both directions in this article we explore the interdependence between the revenues from permit and fossil fuel exports both theoretically and numerically a computable general equilibrium model suggests the fact that russia as a big gas exporter has small effect on the incentives to exert monopoly power in the permit market moreover russia s monopoly power in the permit market has a small but non negligible impact on the optimal level of russian gas exports

do transaction costs influence firm trading behaviour in the european emissions trading system this study is one of the first to empirically investigate firm trading behaviour and the importance of permit trading transaction costs such as information costs and search costs in the first phase of the european union s emissions trading system eu ets the signs and significance of our constructed transaction costs proxy variables indicate for a presence of these costs in the initial years of the eu ets in particular this paper shows that ets firms with the smaller number of installations and with less trading experience were less likely to participate in the european emissions trading market and traded the lower quantities of permits furthermore these firms chose to trade permits indirectly via third parties this study also supports the concerns that transaction costs could be excessive for smaller participants and firms operating in the new eu member states

market power in tradable emission markets a laboratory testbed for emission trading in port phillip bay victoria abstract in theory competitive emission permit markets minimize total abatement costs permit markets are often imperfectly competitive however and may be thin and dominated by large firms the dominant firm s could exercise market power and increase other firms costs of pollution control while reducing their own emission control costs this paper reports a testbed laboratory experiment to examine whether a dominant firm can exercise market power in a permit market organized using the double auction trading institution our parameters approximate the abatement costs of sources in a proposed tradable emissions market for the reduction of nitrogen in the port phillip watershed in victoria australia we vary across treatments the initial allocation of permits to sources so that in one treatment the seller of permits is a monopolist and in another treatment the market is duopolistic we also vary the information that subjects have about the number and abatement costs of their competitors we find that prices and seller profits are higher and efficiency is lower on average in the monopoly sessions compared with the duopoly sessions but the differences are not substantial and are not statistically significant due to pronounced variation across sessions moreover prices profits and transaction volumes are usually much closer to the competitive equilibrium ce than the monopoly equilibrium

intergovernmental versus intersource emissions trading when firms are noncompliant abstract this paper analyzes the relative cost effectiveness of intergovernmental versus intersource cross border emissions trading when polluting firms are noncompliant a special focus is placed on the presence of enforcement costs and the associated credibility problem of governmental monitoring it is shown that without inspection commitment the intergovernmental system is more cost effective because the endorsed flexibility in domestic emission taxation serves as a commitment device for building credibility of monitoring

markets and regulatory hold up problems abstract many regulatory programs such as environmental regulation are effective only if firms make irreversible investments that reduce the cost of compliance a firm potentially subject to regulation may therefore behave strategically by not investing thereby forcing the regulator to void the proposed regulation we show that such incentives which resemble a hold up problem may not be overcome when government s only tool is the imposition of an emissions tax the hold up problem can be overcome by the issuance of tradeable permits a time consistent equilibrium exists with all firms investing and the government imposing regulations even if no permits are traded and their market price is low indeed an observation of no trade may indicate that pollution abatement is great

new economic theories this paper analyses some of the most important spillovers of recent developments of economic theory into environmental economics attention is given to the anlaysis of sustainable economic development paths where endogenous growth models are used the implications of environmental dumping and more generally of policies concerning global environmental issues where new trade theories are very useful and the effectiveness of environmental policy instruments when markets are imperfectly competitive where industrial organisation theory is employed the paper does not only note recent developments in environmental economics but also relates these to the previous environmental economics literature thus it can be assessed whether new results actually improve our knowledge of crucial economic and environmental issues

conspicuous consumption snobbism and conformism abstract we develop a model in which consumers purchase a conspicuous good in order to signal high income and thereby achieve greater social status in equilibrium the signalling value of conspicuous consumption depends in an identifiable way on the number of consumers and consumer behaviour is characterized by either snobbism or conformism the market demand curve for the conspicuous good may exhibit a positive slope if consumers are conformist we derive some unconventional policy implications concerning the taxation of luxuries and the voluntary provision of public goods

a tradable permit system in an intertemporal economy it is known that in an intertemporal competitive economy a tradable permit system may not achieve efficiency without setting appropriate permit interest rates i e rewards for holding permits to find the rates however we need to know in advance the path of efficient permit prices which is difficult to obtain this study intends to solve this problem in two ways first we analyze a special case in which the permit interest rates are given by a simple rule for example if the marginal abatement cost of pollution emission is constant then the appropriate rate is to equal the monetary interest rate as is the case for global warming if the damage is caused in the future far beyond the planning period of the environmental program the appropriate rate coincides with the marginal self recovery of environmental stock under certain conditions as a second approach we propose a tradable permit system with a permit bank as a mechanism by which the permit interest rates are generated endogenously without governmental intervention other than the issuance of permits however we also show that this approach raises the problem of indeterminacy of the equilibrium

non compliance and the quota price in an itq fishery this paper examines the effects of non compliance on quota demands and the equilibrium quota price in an itq fishery i show that whereas lower quota prices are implied unambiguously by expected penalties which are a function of the absolute violation size the expectation of penalties based upon relative violations of quota demands can under certain conditions produce higher quota prices than in a compliant quota market if there are both compliant and non compliant firms in the fishery the result would then be a shift in quota demand from compliant to non compliant firms rather than the reverse the findings are generally applicable to quota markets in other industries including pollution permit markets

corruption and air pollution in europe this paper examines how the effectiveness of regulatory framework influences levels of sulphur emissions in a scenario where to reduce its emission tax payments a polluting firm may under report emissions level at the risk of being audited and fined first a model to explain how changes in regulatory framework e g audit effectiveness and transboundary spillovers affect both actual and reported emissions is developed then the theoretical predictions using data for 39 european countries from 1999 to 2003 are tested and inferences about true emission levels are made the empirical analysis supports the theoretical predictions with significant implications for the interpretation of pollution data reported to international monitoring agencies countries with effective regulation are likely to have relatively high reported emissions of sulphur but this should not automatically be interpreted as weak environmental performance because their actual pollution levels are likely to be lower than in nations with less effective regulation

guidelines on searching for a dalton improving tax reform an illustration with data from indonesia this article documents the search for a dalton improving tax and expenditure reform using a methodology developed by yitzhaki and slemrod 1991 and mayshar and yitzhaki 1995 the methodology overcomes the need to define a specific social welfare function by searching instead for reforms that improve each social welfare function belonging to a wide class of functions the authors apply the method to the energy sector of indonesia ignoring distributional constraints and find that both the subsidy on kerosene and the tax on gasoline should be reduced but taking distributional concerns into account the present structure of energy taxes is reasonable and the country may benefit by increasing the subsidy to kerosene taxing electricity and reducing the gasoline tax these conclusions are robust to changes in the relevant parameters representing the indonesian economy

enforcing transferable permit systems in the presence of market power we derive an enforcement strategy for a transferable permit system in the presence of market power that achieves complete compliance in a cost effective manner we show that the presence of a firm with market influence makes designing an enforcement strategy more difficult than enforcing a perfectly competitive system we also re consider hahn s 1984 suggestion that a firm with market influence should be allocated permits so that it chooses to not participate in the permit market when enforcement and its costs are taken into account hahn s suggestion does not hold except in a very special case the presence of market power will limit the extent to which transferable emissions permit systems can fulfill their theoretical promises hahn 1984 was the first to show that permit trading in the presence of market power cannot be expected to result in a distribution of emissions that minimizes aggregate abatement costs furthermore the distribution of emissions will never be completely independent of the initial allocation of permits modeling a transferable permit system in which one firm has market power while the rest are perfect competitors a dominant firm competitive fringe model hahn demonstrated that aggregate abatement costs are minimized only when the dominant firm is allocated exactly the number of permits it will choose to hold in equilibrium simply aggregate abatement costs are minimized only when a firm that can manipulate the permit price does not because it chooses to not trade permits like most of the theoretical literature on transferable permit systems hahn ignored the fact that compliance in a permit system must be enforced recognizing this important omission van egteren and weber 1996 extended hahn s work to

using history dependence to design a dynamic tradeable quota system under market imperfections a transferable quota system is analysed in a two period model with market power so far the management mechanisms presented in the literature to remedy market power have either not succeeded in securing efficiency in the distribution of quota within and across time periods or have resulted in only one of the two inefficiencies being eliminated in this paper a new mechanism is introduced where allocation of quota is made dependent upon historic quota acquisitions this opens for a trade off between distributional and time efficiency or under specific circumstances securing overall efficiency

veblen effects in a theory of conspicuous consumption the authors examine conditions under which veblen effects arise from the desire to achieve social status by signaling wealth through conspicuous consumption while veblen effects cannot ordinarily arise when preferences satisfy a single crossing property they may emerge when this property fails in that case budget brands are priced at marginal cost while luxury brands though not intrinsically superior are sold at higher prices to consumers seeking to advertise wealth luxury brands earn strictly positive profits under conditions that would with standard formulations of preferences yield marginal cost pricing the authors explore factors that induce veblen effects and they investigate policy implications copyright 1996 by american economic association

systems competition and network effects this paper discusses firm behavior market performance and the public and private institutions that arise in systems markets i e markets where consumers use compatible components together to generate benefits in such markets which include communications networks and hardware software networks popular products are inherently more valuable these network effects can drive corporate strategies and are critical in understanding innovation in many high technology markets the discussion here emphasizes the dynamics of consumer adoption decisions in the presence of network effects competition between incompatible systems and how suppliers choose which components are compatible and which are not

a panel data heterogeneous bayesian estimation of environmental kuznets curves for co2 emissions this article investigates the environmental kuznets curves ekc for co2 emissions in a panel of 109 countries during the period 1959 to 2001 the length of the series makes the application of a heterogeneous estimator suitable from an econometric point of view the results based on the hierarchical bayes estimator show that different ekc dynamics are associated with the different sub samples of countries considered on average more industrialized countries show evidence of ekc in quadratic specifications which nevertheless are probably evolving into an n shape based on their cubic specification nevertheless it is worth noting that the eu and not the umbrella group led by us has been driving currently observed ekc like shapes the latter is associated to monotonic income co2 dynamics the eu shows a clear ekc shape evidence for less developed countries consistently shows that co2 emissions rise positively with income though there are some signs of an ekc analyses of future performance neverthe