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Firm Preferences for Environmental Regulation

9 Pages Posted: 14 Dec 2014  

Felix Munoz-Garcia

Washington State University - School of Economic Sciences

Sherzod B. Akundjanov

Washington State University - School of Economic Sciences

Date Written: November 27, 2014

Abstract

This paper summarizes the findings of two papers that examine the effect of environmental regulation on the production decisions and profits of polluting and green firms. Using a game-theoretic framework, we find conditions under which the green firm favors regulation (a standard finding), but also derive conditions for the opposite – and more surprising – scenario, whereby the green firm opposes environmental regulation, while the brown firm favors it. We also show that similar preference reversals can occur towards uniform and fine-tuned regulation. Our study highlights the role that firm heterogeneity plays in determining firm preferences towards environmental regulation.

Keywords: Cost asymmetry, Cost disadvantage, Emission fees, Green firms

JEL Classification: L13, D62, H23, Q50

Suggested Citation

Munoz-Garcia, Felix and Akundjanov, Sherzod B., Firm Preferences for Environmental Regulation (November 27, 2014). Review of Environment, Energy and Economics (Re3), November 2014. Available at SSRN: https://ssrn.com/abstract=2537395

Felix Munoz-Garcia

Washington State University - School of Economic Sciences ( email )

P.O. Box 646210
Hulbert Hall 101
Pullman, WA 99164-6210
United States

HOME PAGE: http://www.ses.wsu.edu/People/munoz.htm

Sherzod B. Akundjanov (Contact Author)

Washington State University - School of Economic Sciences ( email )

PO Box 646210
Hulbert Hall 101
Pullman, WA
United States

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