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Environmental Policy and Social Efficiency under Free Entry

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DOI: 10.4236/me.2019.109132    111 Downloads   263 Views

ABSTRACT

In this paper, we first show that if the firm’s production leads to environmental damage and the government does not implement any environmental policy by using a two-stage game model, the “excess-entry” theorem holds. We then show that entry can be socially insufficient in the presence of production externality and policy mix is needed for pollution control in oligopoly industry with endogenous market structure. Hence, the anti-competitive entry regulation policy suggested by the “excess-entry” theorem does not always hold.

Cite this paper

Tsai, T. , Chen, S. , Lu, Y. , Hsu, C. and Lee, J. (2019) Environmental Policy and Social Efficiency under Free Entry. Modern Economy, 10, 2110-2119. doi: 10.4236/me.2019.109132.

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