Pollution Regulation of Competitive Markets
研究了寡头垄断企业如何通过减排、减产、排放交易或缴税应对污染规制，发现精心设计的规制不仅能减少污染，还能在改善企业利润的同时提升消费者剩余和社会福利，即规制在广泛条件下帕累托优于放任自由。
We develop a model of oligopolistic firms that produce partially differentiated products and generate pollution as a byproduct. We analyze and compare two types of pollution regulation: Cap-and-Trade and Taxes. Firms can respond to regulation by any combination of pollution abatement, output reduction, emissions trading (under Cap-and-Trade), or payment of pollution taxes (under Taxes). We prove that well-chosen regulation can, besides reducing pollution, actually improve firms’ profits relative to laissez-faire (unregulated markets), and simultaneously improve consumer surplus and welfare. Thus, regulation Pareto-dominates laissez-faire under a wide range of plausible conditions. These results are driven by an unintended consequence of pollution regulation: Competing firms can use the regulation to tacitly (and credibly) collude to reduce production and improve their profits. We show that the degree of competition plays a critical role in determining the economic consequences of pollution regulation. Our results suggest that the regulator’s primary consideration should be the impact of regulation on consumers rather than producers. This paper was accepted by Vishal Gaur, operations management.