International Trade, Factor Movements, and the Environment

By Michael Rauscher | Go to book overview

Appendix

6.A1 Location of the Nash Equilibrium with Strategic Environmental Policy

Proposition 6.9 is proved by comparing the slopes of the domestic firm's iso-profit curve and the foreign firm's reaction curve in the Nash equilibrium with strategic choice of emission taxes. We assume that the marginal environmental damage is fixed, i.e. u′ is constant. The profits of the domestic firm can be expressed as

π(te,s) = π(sau′) + c + ̃(sau′) - c + ̃(te,s),

where te,s is the strategic tax rate, given by equation (6.24). The profits of a firm subject to this taxation equal the profits of a firm subject to the Pigouvian tax rate, sau′, plus the subsidy which is the cost with Pigouvian taxation minus the cost with strategic taxation. The other arguments of the functions have been omitted for convenience. The profit maximum is determined by:

πq(sau′) + c + ̃q(sau′) - c + ̃q(te,s) = 0. (6.A1)

Using a Taylor series approximation, one obtains

πq(sau′) - (te,s - sau′)c + ̃qt(te,s) - ζ = 0. (6.A2)

ζ is a positive term for the correction of the error which is due to the approximation of the non-linear concave function by a linear one. For te,s - sau′, one can use equation (6.24) and after some rearranging of terms, one arrives at

(6.A3)

where the arguments of the functions have been omitted for convenience. It follows from equation (6.22) that the slope of the foreign firm's reaction curve can be represented by R + ̆q = Qt/qt < 0. Moreover, πqQ is the slope of the iso-profit curve (for a firm subject to Pigouvian taxes). The numerator of the first term on the right-hand side equals one if there is no transfrontier pollution. In this case the isoprofit curve is flatter than the foreign firm's reaction curve. In the case of substantial transfrontier pollution the numerator is greater than one and the iso-profit curve may be steeper. This proves proposition 6.9. If the environmental-damage function is non-linear and the marginal damage is increasing, then the first effect is reinforced and a scenario where the strategic Nash equilibrium is located left of the Stackelberg point becomes more likely.

-214-

Notes for this page

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this book

This book has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this book

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this page

Cited page

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited page

Bookmark this page
International Trade, Factor Movements, and the Environment
Table of contents

Table of contents

Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this book

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
/ 340

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Author Advanced search

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.