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The switching effect of environmental taxation within Bertrand differentiated duopoly

Research output: Contribution to Journal/MagazineJournal articlepeer-review

Published
<mark>Journal publication date</mark>09/2011
<mark>Journal</mark>Journal of Environmental Economics and Management
Issue number2
Volume62
Number of pages11
Pages (from-to)267–277
Publication StatusPublished
<mark>Original language</mark>English

Abstract

We investigate second-best optimal taxation of the polluting variety of a product in a Bertrand duopoly with differentiated varieties. The analysis provides novel insight on a useful social function of environmental regulation. Besides internalizing the environmental externality, the taxation of the polluting variety improves the matching of consumers and product varieties, and so creates a socially desirable business switching between the differentiated varieties.