Welfare Effect of Mergers and Trade Liberalization

In a two-country model where firms behave à la Cournot, we show that marginal and non-marginal trade liberalization have different effects on the social desirability of horizontal mergers. Marginal tariff reductions increase (decrease) the desirability of merger at sufficiently low (high) tariff levels. In the neighborhood of free trade, for sufficiently low cost savings from merger, trade liberalization increases the desirability of merger whilst decreasing the profitability, implying that mergers should be actively encouraged by competition authorities. Furthermore, we identify ranges of tariff levels for which, if trade liberalization increases (decreases) the desirability of merger, it necessarily increases (decreases) its profitability.

'The Voracity Effect' and Climate Change: The Impact of Clean Technologies

In the absence of a successful international cooperative agreement over the control of emissions there is a growing interest in the role that clean technologies may play to alleviate the climate change problem. Within a non-cooperative transboundary pollution game, we investigate, analytically and within a numerical example based on empirical evidence, the impact of the adoption of a cleaner technology (i.e., a decrease in the emission to output ratio). We show that countries may respond by increasing their emissions resulting in an increase in the stock of pollution that may be detrimental to welfare. This possibility is shown to arise for a signi cant and empirically relevant range of parameters. It is when the damage and/or the initial stock of pollution are relatively large and when the natural rate of decay of pollution is relatively small that the perverse e¤ect of clean technologies is strongest. Cooperation over the control of emissions is necessary to ensure that the development of cleaner technologies does not exacerbate the free riding behavior that is at the origin of the climate change problem.transboundary pollution;renewable resource;climate change;clean technolo- gies;differential games

Collusion Inducing Taxation of a Polluting Oligopoly

We show that an environmental regulation such as a tax on pollution can act as a collusive device and induce stable cartelization in an oligopolistic polluting industry. We consider a dynamic game where pollution is allowed to accumulate into a stock over time and a cartel that includes all the firms in the industry. We show that a tax on pollution emissions can make it unprofitable for any firm to leave the cartel. Moreover the cartel formation can diminish the welfare gain from environmental regulation. We provide an example where social welfare under environmental regulation and collusion of firms is below social welfare under a laisser-faire policy.pollution tax;oligopoly;cartel formation;coalition formation;differential game

Adaptation Effectiveness and Free-Riding Incentives in International Environmental Agreements

While an international agreement over the reduction of greenhouse gases (GHGs) emissions proves to be elusive, there is a large and growing support for investment in developing more effective technologies to adapt to climate change. We show that an increase in effectiveness of adaptation will diminish the incentive of individual countries to free-ride on a global agreement over emissions. Moreover, we show that this positive effect of an increase in adaptation's effectiveness can also be accompanied by an increase in the gains from global cooperation over GHGs emissions.adaptation;climate change;international environmental agreements;transboundary pollution

EAERE Award for the Best Paper Published in Environmental and Resource Economics During 2013

This is the author accepted manuscript. The final version is available from Springer Verlag via the DOI in this record

EAERE Award for the Best Paper Published in Environmental and Resource Economics During 2014

This is the author accepted manuscript. The final version is available from Springer Verlag via the DOI in this record