Abstract

http://ssrn.com/abstract=2199436
 


 



The Entry-Deterring Effects of Environmental Policy


Ana Espinola-Arredondo


Washington State University - School of Economic Sciences

Felix Munoz-Garcia


Washington State University - School of Economic Sciences

January 10, 2013

Review of Environment, Energy and Economics (Re3), Forthcoming

Abstract:     
This article summarizes results of a study that investigates the signaling role of environmental policy in promoting, or hindering, the ability of a monopolist to practice entry deterrence. We show that environmental policy can facilitate the incumbent firm’s concealment of information from potential entrants, thus deterring entry, and yet entailing welfare improvements. When the regulator is absent, we demonstrate that firms’ entry-deterring practices increase pollution relative to a complete information context. Hence, under certain conditions, environmental regulation becomes more beneficial in incomplete than in complete information settings. Furthermore, our results examine how this welfare benefits vary as firms become more symmetric in their production costs.

Number of Pages in PDF File: 8

Keywords: entry deterrence, signaling, emission fees, Welfare benefits

JEL Classification: D82, H23, L12, Q5

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Date posted: January 12, 2013  

Suggested Citation

Espinola-Arredondo, Ana and Munoz-Garcia, Felix, The Entry-Deterring Effects of Environmental Policy (January 10, 2013). Review of Environment, Energy and Economics (Re3), Forthcoming. Available at SSRN: http://ssrn.com/abstract=2199436

Contact Information

Ana Espinola-Arredondo (Contact Author)
Washington State University - School of Economic Sciences ( email )
111C Hulbert Hall, Pullman, WA 99164
Pullman, WA 99164-4741
United States
509-335-8494 (Phone)
HOME PAGE: http://www.ses.wsu.edu/People/espinola.htm
Felix Munoz-Garcia
Washington State University - School of Economic Sciences ( email )
P.O. Box 646210
Pullman, WA 99164-6210
United States
HOME PAGE: http://www.ses.wsu.edu/People/munoz.htm
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