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Patcharin Koonsed
 
''Optimal policy under duopoly with environmental quality''
( 2015, Vol. 35 No.3 )
 
 
This paper examines the optimal excise tax policy and the optimal environmental quality subsidy when consumers are willing to pay a price premium for environmentally friendlier variants of commodities with vertically differentiated environmental qualities. When high and low environmental quality producers exist in the market and the demand for both firms are positive, two policies are necessary to revise the firms' market power and the pollution externalities. Conversely, when all consumers demand high environmental quality products, only one policy is required to correct the pollution externality.
 
 
Keywords: environmentally conscious consumers, environmental quality, excise tax, subsidies, R&D, vertical differentiation
JEL: H2 - Taxation, Subsidies, and Revenue: General
L1 - Market Structure, Firm Strategy, and Market Performance: General
 
Manuscript Received : May 09 2015 Manuscript Accepted : Sep 22 2015

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