Rupayan Pal, Indira Gandhi Institute of Development Research (IGIDR), Film City Road, Gen. A. K. Vaidya Marg, Goregaon (East), Mumbai 400065, India (email@example.com). Bibhas Saha, School of Economics, University of East Anglia, Norwich NR4 7TJ, United Kingdom (firstname.lastname@example.org).
Mixed Duopoly and Environment
Article first published online: 29 JUL 2013
© 2013 Wiley Periodicals, Inc.
Journal of Public Economic Theory
Volume 16, Issue 1, pages 96–118, February 2014
How to Cite
PAL, R. and SAHA, B. (2014), Mixed Duopoly and Environment. Journal of Public Economic Theory, 16: 96–118. doi: 10.1111/jpet.12056
We gratefully acknowledge helpful comments from two anonymous referees. Remaining errors, if any, are our responsibility.
- Issue published online: 7 JAN 2014
- Article first published online: 29 JUL 2013
- Accepted manuscript online: 21 MAY 2013 10:42AM EST
- Manuscript Accepted: 16 FEB 2012
- Manuscript Received: 27 JAN 2011
We show under general demand and cost conditions that in a mixed duopoly with pollution the government can implement the socially optimal outputs and abatements by a tax-subsidy scheme and keeping the public firm fully public. The scheme requires taxing outputs and subsidizing abatements at different rates, unlike a pollution tax. Our result improves on the shortcoming of a pollution tax to implement the social optimum. We also show that when the private firm is partly foreign-owned, the government will adopt some privatization and will not implement the social optimum, though the social optimum is implementable.