A BEJTE Topics article.

Abstract

In a two-stage Cournot oligopoly cost minimization sometimes calls for ex ante identical firms to invest in diverse technologies. It is an implication of this result that it might be optimal to treat identical duopolistic polluters asymmetrically. We discuss the efficiency properties of a per-unit tax and a tradable permit when ex ante identical duopolists should ideally invest asymmetrically. It is argued that a tradable permit is efficient in promoting differential investments.

Submitted: May 22, 2006 · Accepted: May 11, 2007 · Published: May 21, 2007

Recommended Citation

Vetter, Henrik (2007) "Taxes versus Permits in a Two-Stage Duopoly," The B.E. Journal of Theoretical Economics: Vol. 7 : Iss. 1 (Topics), Article 17.
DOI: 10.2202/1935-1704.1318
Available at: http://www.bepress.com/bejte/vol7/iss1/art17