TITLE:
Environmental Policy and Social Efficiency under Free Entry
AUTHORS:
Ting-Chung Tsai, Shih-Shen Chen, Yi-Shan Lu, Chu-Chuan Hsu, Jen-Yao Lee
KEYWORDS:
Pollution, Environment, Emission Tax, Social Efficiency
JOURNAL NAME:
Modern Economy,
Vol.10 No.9,
September
23,
2019
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.