Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/117999
Authors: 
Mensink, Paul
Year of Publication: 
2004
Series/Report no.: 
Nota di Lavoro, Fondazione Eni Enrico Mattei 124.2004
Abstract: 
This paper analyzes incentives for polluting firms to exchange abatement cost information under the non-linear pollution tax scheme (‘differential tax') introduced by Kim and Chang [J. Regul. Econom. 5, 1993, 193-197]. It shows that polluting firms have - under mild conditions - an incentive to join a coalition whose members mutually truthfully exchange information as well as commit themselves with respect to their abatement decisions. As a result, the differential tax triggers instantly - i.e. no abatement adaptation is needed – efficient abatement levels without the regulator knowing marginal abatement costs. Consequently, this paper shows that differential taxation results in lower social costs than traditional non-linear taxation which triggers efficient emissions only after a period of non-efficient abatement.
Subjects: 
Externalities
Pollution taxes
Coalition formation
Non-linear taxation
Asymmetric information
Co-operative game theory
JEL: 
C71
D62
D82
Q20
Document Type: 
Working Paper

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