Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/18992
Authors: 
Breitscheidel, Jörg
Gersbach, Hans
Year of Publication: 
2005
Series/Report no.: 
CESifo working papers 1528
Abstract: 
We explore the design of self-financing tax/subsidy mechanisms to solve hold-up problems in environmental regulation. Under Cournot competition, announcing the subsidy rate seems to be preferable to announcing the tax rate. Moreover, for constant marginal damage the hold-up problem can always be solved by setting subsidies. Under Bertrand competition, only announcing the tax rate can induce at least one firm to invest. We suggest that feebate systems in the automotive sector should be designed as self-financing tax/subsidy mechanisms.
Subjects: 
hold-up problems
environmental regulation
taxes and subsidies
self-financing mechanisms
emission control
JEL: 
D43
Q28
L50
D62
Document Type: 
Working Paper

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