Policy and Product Differentiations Encourage the International Transfer of Environmental Technologies

This paper investigates the welfare effects of international transfers of environmental technologies in open economies with international oligopoly and transboundary pollution, and shows that policy differentiation between the donor and recipient countries and/or product differentiation between the donor and recipient firms play a critical role in obtaining a bilateral agreement on the transfer policy between nations. The results arise from the fact that policy differentiation weakens the strategic relationships in environmental policy setting between governments and that product differentiation weakens the strategic relationships in quantity choices between firms.Technology Transfer; Environmental Tax; Oligopoly

Strategic Voting for Noncooperative Environmental Policies in Open Economies

In this paper, we construct a political-economy model of international noncooperative environmental policymaking, and examine the strategic incentives for voters to elect an environmental policymaker in open economies. We show that under several circumstances, citizens have an incentive to deliberately vote for a candidate whose environmental preferences differ from their own. Further, the strategic voting incentives are crucially depend on the environmental policy tools employed by the government, the international market structures, and the degree of product differentiation among firms.strategic voting, the race to the bottom, market structure, environmental policy

Optimal Environmental Policy under Monopolistic Provision of Clean Technologies

In this paper, we characterize optimal environmental policy in a case where innovation in clean production technologies is developed and provided by a monopoly. Two policy instruments are considered: an emission tax on downstream polluting firms and an R& D subsidy for an upstream innovator in clean technologies. We find that (i) a higher emission tax may increase (decrease) R&D investment when the burden of the tax payment in the polluters' marginal costs and the price-elasticity of the demand for polluting goods are rather small (large), (ii) the social optimum can be achieved by the combined implementation of an emission tax that is smaller than an ex-ante Pigouvian rate and a subsidy that is equal to the rate of emission reduction due to the new technology, and (iii) if the policy instrument is limited to the emission tax, the second-best tax rate lies between the first-best rate and the ex-ante Pigouvian rate. We test our model by numerical simulation and demonstrate the possibility of a type of ``double dividend'' due to the emission tax. Three extensions of the model are then considered: Cournot competition in the polluting industry, a subsidy to polluters who adopt the new technology, and technology spillovers.Environmental Tax; R&D; Environmental Damages; Patent

Firm Incentives for Environmental R&D under Non-cooperative and Cooperative Policies

This paper investigates firm incentives for developing environmentally clean technologies in a simple two-country model with international oligopoly, and compares them under price and quantity regulations with and without policy cooperation between governments. Under any policy regime, whether firm incentives are either excessive or insufficient from a welfare point of view depends on the marginal environmental damage and the degree of emission spillovers. If the marginal damage is relatively large, a quantity instrument encourages innovation more than a price instrument. In addition, under either regime of price and quantity regulations, policy cooperation (harmonization) necessarily enhances welfare in each country, but it does not necessarily increase firms' innovation incentives.Technology innovation; International oligopoly; Environmental policy; Policy harmonization

When Government Misleads US: Sending Misinformation as Protectionist Devices

In this paper, we examine the incentive of the home government to mislead home consumers by sending misinformation. We nd that positive misinformation on home products and negative misinformation on foreign products always increases the prot of the home rm, while when the marginal costs of home and foreign rms are the same, a small amount of positive misinformation decreases the consumer surplus. Moreover, when the home government maximizes home welfare, it chooses to send positive misinformation on the home product and negative misinformation on the foreign product. The stronger is the competition faced by the home rm, the greater is the amount of negative misinformation on the foreign product. By contrast, the optimal amount of misinformation on each product used to maximize world welfare is positive. We also demonstrate that trade liberalization can increases the incentive of the home government to send misinformation.Strategic misleading, misinformation, non-tari trade policies

Misleading Advertising in Duopoly

In this paper, we build a model of strategic misleading advertising in duopolistic markets with horizontal product differentiation and advertising externality between firms. We investigate the effects of regulating misinformation on market competition, behavior of firms, and social welfare. We show that the degree of advertising externality and the magnitude of advertising costs are crucial for determining the welfare effects of several regulations, including prohibiting misleading advertising, educating consumers, taxing production, and taxing misleading advertising. We then extend the model by introducing two types of heterogeneities; heterogeneous consumers and heterogeneous production costs between firms.Misleading Advertising, Regulation; Duopoly, Product Differentiation, Advertising Externality

Endogenous Timing in Strategic Environmental Policymaking

In this paper, we endogenize the timing of policymaking in a simple two-country model of strategic environmental policy. We consider a timing game in which two policymakers non-cooperatively decide their preferred sequence of moves before setting emission tax rates. We show that whether the policymakers implement emission tax policies simultaneously or sequentially crucially depends on the magnitude of environmental damages: When the damages are insignificant, the tax rates are strategic substitutes and the simultaneous-move policymaking emerges in equilibrium. In contrast, when the damages are significant, the tax rates are strategic complements and the sequential-move policymaking emerges. In addition, we extend the model by allowing for differences in the vulnerability to environmental damages between countries. When the differences are large, the unique equilibrium of the game is the situation where the less vulnerable country acts as a leader. In the case where multiple equilibrium emerges, the risk dominant equilibrium is also that the less vulnerable country leads.Strategic environmental policy; Endogenous timing; Environmental tax; Duopoly

Alliance Partner Choice in Markets with Vertical and Horizontal Externalities

This study investigates the choice between complementary and parallel alliances in a market with vertical and horizontal externalities. One composite goods firm competes with two components producers, each providing a complementary component of a differentiated com- posite good. Although the joint profits from a parallel alliance between the composite goods firm and a components producer are always larger than those from a complementary alliance between components producers, through Nash bargaining, a components producer prefers the complementary (parallel) alliance when the degree of product differentiation is sufficiently large (small). Combined with the result that a complementary alliance is socially preferable, our findings provide meaningful implications for antitrust policy.Complementary alliance; Parallel alliance; Nash bargaining; Antitrust policy

Policy and Product Differentiations Encourage the International Transfer of Environmental Technologies

This paper investigates the welfare effects of international transfers of environmental technologies in open economies with international oligopoly and transboundary pollution, and shows that policy differentiation between the donor and recipient countries and/or product differentiation between the donor and recipient firms play a critical role in obtaining a bilateral agreement on the transfer policy between nations. The results arise from the fact that policy differentiation weakens the strategic relationships in environmental policy setting between governments and that product differentiation weakens the strategic relationships in quantity choices between firms

Policy and Product Differentiations Encourage the International Transfer of Environmental Technologies

This paper investigates the welfare effects of international transfers of environmental technologies in open economies with international oligopoly and transboundary pollution, and shows that policy differentiation between the donor and recipient countries and/or product differentiation between the donor and recipient firms play a critical role in obtaining a bilateral agreement on the transfer policy between nations. The results arise from the fact that policy differentiation weakens the strategic relationships in environmental policy setting between governments and that product differentiation weakens the strategic relationships in quantity choices between firms