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Unpublished Paper
Market Structure and the Cost of Compliance with Environmental Regulation
  • Stuart McDonald
This paper analyses the expected level of non-compliance with environmental standards within in an oligopolistic industry. The paper departs from the previous literature on environmental compliance by allowing for the possibility of product differentiation. In doing this, the paper provides results quantifying the important role that strategic complements and substitutes have in determining both the relative degree of non-compliance and level of fines required to achieve both partial and universal compliance with environmental standards. The paper shows that under Bertrand competition it is relatively more difficult to achieve compliance with environmental standards than under Cournot competition, requiring larger fines to achieve both partial and universal compliance. The paper also shows that when goods are substitutes, that the rate of compliance among firms competing as Cournot oligopolists is higher than if firms were competing in a Bertrand market. The opposite being the case if firms are producing complementary goods.
  • Environmental standards; non-compliance; product differentiation; strategic complements and substitutes.
Publication Date
January, 2013
Citation Information
Stuart McDonald. "Market Structure and the Cost of Compliance with Environmental Regulation" (2013)
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