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| Author: | Laplante, B. |
| Title: | Producer surplus and subsidization of pollution control device: a non-monotonic relationship. |
| Journal: | Journal of Industrial Economics
1990 : SEP, VOL. 39:1, p. 15-23 |
| Index terms: | ENVIRONMENTAL PROTECTION POLLUTION CONTROL LEGISLATION |
| Language: | eng |
| Abstract: | Regulators have been concerned with the impact of environmental regulation on the profitability of regulated firms: there have been numerous grants and subsidy programs to reduce the cost of emission control equipment. Intuitively, there should be a monotonically increasing relationship between profits and the amount of subsidization. However, it is shown that this may not be so since regulation may establish a collusive outcome amongst oligopolistic competitors. The role of the subsidization policy may then be seen as the following: given Cournot players , the regulator may subsidize the emission control device to prevent the industry from reaching a profit superior outcome. |
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