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Market Structure and Environmental Innovation

Author

Abstract
This paper studies firmsÂ’ incentives to invest in environmental R&D under different market structures (Cournot and Bertrand) and environmental policy instruments (emission standards, taxes, tradable permits and auctioned permits). Because of market strategic effects, R&D incentives vary widely across market structures and instruments. For example, when firmsÂ’ products are strategic substitutes (i.e., Cournot), either emission standards, taxes or auctioned permits can provide the most incentives. But when firmsÂ’ products are strategic complements, either taxes or auctioned permits provide the most incentives. If markets are perfectly competitive, however, permits and emission standards offer similar incentives that are lower than those offered by taxes.

Suggested Citation

  • Juan-Pablo Montero, 2002. "Market Structure and Environmental Innovation," Journal of Applied Economics, Universidad del CEMA, vol. 5, pages 293-325, November.
    • Handle: RePEc:cem:jaecon:v:5:y:2002:n:2:p:293-325
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    File URL: https://ucema.edu.ar/publicaciones/download/volume5/montero.pdf
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    References listed on IDEAS

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    1. Parry, Ian W H, 1998. "Pollution Regulation and the Efficiency Gains from Technological Innovation," Journal of Regulatory Economics, Springer, vol. 14(3), pages 229-254, November.
    2. Montero, Juan-Pablo, 2002. "Permits, Standards, and Technology Innovation," Journal of Environmental Economics and Management, Elsevier, vol. 44(1), pages 23-44, July.
    3. James A. Brander & Barbara J. Spencer, 1983. "Strategic Commitment with R&D: The Symmetric Case," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 225-235, Spring.
    4. Biglaiser, Gary & Horowitz, John K, 1995. "Pollution Regulation and Incentives for Pollution-Control Research," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 3(4), pages 663-684, Winter.
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    8. Daniel F. Spulber, 1989. "Regulation and Markets," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262192756, April.
    9. Montero, Juan-Pablo, 2002. "Market Structure and Environmental Innovation," Journal of Applied Economics, Universidad del CEMA, vol. 5(2), pages 1-33, November.
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    12. Requate, Till, 1998. "Incentives to innovate under emission taxes and tradeable permits," European Journal of Political Economy, Elsevier, vol. 14(1), pages 139-165, February.
    13. Juan-Pablo Montero, 2002. "Market Structure and Environmental Innovation," Journal of Applied Economics, Taylor & Francis Journals, vol. 5(2), pages 293-325, November.
    14. Laffont, Jean-Jacques & Tirole, Jean, 1996. "Pollution permits and environmental innovation," Journal of Public Economics, Elsevier, vol. 62(1-2), pages 127-140, October.
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    More about this item

    Keywords

    environment; regulation; market structure; innovation;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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