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Three problems in the market of a green product : fiscal avoidance, signal, and vertical differentiation

Abstract : Environmental quality having features of a public good is the subject of the thesis. In a theoretical framework, we study a means of environmental regulation of a polluting firm endowed with market power and then determine the optimal decentralized choice of environmental quality. We start with examining how tax avoidance affects the optimal second-best tax on polluting emissions in a monopoly setting. The firm is owned by shareholders who differ in their cost of tax dodging. The optimal tax should correct two negative externalities of avoidance: the firm's free-riding effect and a tax base erosion effect. This free-riding makes the regulator either impotent or unfair, depending on the severity of the environmental damage and the firm's efficiency. Next, we analyze the impact of an environmental tax on the signaling price strategy of a monopoly that communicates to consumers the unobservable information about firm's highenvironmental performance. We use the intuitive and undefeated criteria of equilibrium selection. Asymmetric information places the optimal second-best tax below the level required under complete information. In the case of undefeated equilibria selection, the tax may induce a "migration" from separating equilibrium to pooling making the firm prefer to conceal the private information about environmental quality. Finally, we show that market choice of environmental quality by a firm that internalizes environmental damage from polluting emissions is yet suboptimal.
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Submitted on : Thursday, June 14, 2018 - 4:01:56 PM
Last modification on : Wednesday, October 14, 2020 - 4:04:05 AM
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  • HAL Id : tel-01815964, version 1


Maria Chistyakova. Three problems in the market of a green product : fiscal avoidance, signal, and vertical differentiation. Economics and Finance. Université Montpellier, 2017. English. ⟨NNT : 2017MONTD039⟩. ⟨tel-01815964⟩



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