Journal article
Regulation, free-riding incentives, and investment in R&D with spillovers
Resource and energy economics, Vol.53, pp.133-146
08/01/2018
Abstract
•We analyze the effects of type-dependent and uniform emission fees on clean R&D.•When technology spillovers are low, type-dependent fees outperform uniform fees.•When spillovers are significant, both policy options yield similar outcomes.•Profits are larger for the low-cost firm when operating under type-dependent fees.
In this paper, we analyze a duopoly market with investment in abatement technology under environmental regulation. We use a three-stage game where firms invest in a green technology with spillover effects in the first stage, the regulator sets the emission fee in the second stage, and production of the polluting good occurs in the third stage. We analyze two different regulatory regimes: (1) each firm faces the same emission fee (uniform fee), and (2) each firm faces an emission fee dependent on the investment in green technology (type-dependent fee). Firms can differ through their costs of investing in the abatement technology (asymmetric efficiency). We obtain that social welfare is unambiguously higher under the type-dependent regime than otherwise. In addition, we find that the asymmetry in efficiency of investment affects firms’ profits, identifying that efficient (inefficient) firms favor type-dependent (uniform) policy regimes.
Metrics
3 Record Views
Details
- Title
- Regulation, free-riding incentives, and investment in R&D with spillovers
- Creators
- John C. Strandholm - University of South Carolina UpstateAna Espínola-Arredondo - Washington State UniversityFelix Munoz-Garcia - Washington State University
- Publication Details
- Resource and energy economics, Vol.53, pp.133-146
- Academic Unit
- Economic Sciences, School of
- Publisher
- Elsevier B.V
- Identifiers
- 99900971132801842
- Language
- English
- Resource Type
- Journal article