Hostname: page-component-586b7cd67f-2brh9 Total loading time: 0 Render date: 2024-11-22T07:30:02.675Z Has data issue: false hasContentIssue false
  • English
  • Français

Why do firms oppose entry-deterring policies? Environmental regulation and entry deterrence

Published online by Cambridge University Press:  23 April 2014

Ana Espínola-Arredondo  and
Félix Muñoz-García
Ana Espínola-Arredondo
Affiliation:
School of Economic Sciences, Washington State University, 111C Hulbert Hall, Pullman, WA 99164, USA. E-mail: [email protected]
Félix Muñoz-García
Affiliation:
School of Economic Sciences, Washington State University, USA. E-mail: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper investigates the design of environmental regulation under different regimes: flexible and inflexible policies. We analyze under which settings strict emission fees can be used as an entry-deterring tool, and become socially optimal. Furthermore, we demonstrate that the incentives of the social planner and the incumbent firm are aligned regarding policy regimes ifentry can be easily deterred by setting a stringent regulation. Their incentives, however, can bemisaligned when entry becomes more costly to deter, leading the incumbent to actually preferenvironmental policies that attract entry.

Type
Research Article
Information
Environment and Development Economics , Volume 20 , Issue 2 , April 2015 , pp. 141 - 160
Copyright
Copyright © Cambridge University Press 2014 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Bain, J. (1956), Barriers to New Competition, Cambridge, MA: Harvard University Press.CrossRefGoogle Scholar
Brock, W. and Evans, D. (1985), ‘The economics of regulatory tiering’, RAND Journal of Economics 16(3): 398–409.CrossRefGoogle Scholar
Buchanan, J.M. (1969), ‘External diseconomies, corrective taxes and market structure’, American Economic Review 59: 174–177.Google Scholar
Dean, T. and Brown, R. (1995), ‘Pollution regulation as a barrier to new firm entry: initial evidence and implications for further research’, Academy of Management Journal 38(1): 288–303.CrossRefGoogle Scholar
Dean, T., Brown, R., and Stango, V. (2000), ‘Environmental regulation as a barrier to the formation of small manufacturing establishments: a longitudinal examination’, Journal of Environmental Economics and Management 40(1): 56–75.CrossRefGoogle Scholar
Dixit, A. (1980), ‘The role of investment in entry-deterrence’, Economic Journal 90: 95–106.CrossRefGoogle Scholar
EPA (Environmental Protection Agency) (2001), ‘The United States experience with economic incentives for protecting the environment’, National Center for Environmental Economics, Washington, DC.Google Scholar
Espinola-Arredondo, A. and Munoz-Garcia, F. (2013), ‘When does environmental regulation facilitate entry-deterring practices’, Journal of Environmental Economics and Management 65(1): 133–152.CrossRefGoogle Scholar
Farzin, Y.H. (2003), ‘The effects of emission standards on industry’, Journal of Regulatory Economics 24: 315–327.CrossRefGoogle Scholar
Fudenberg, D. and Tirole, J. (1984), ‘The fat-cat effect, the puppy-dog ploy, and the lean and hungry look’, American Economic Review 74(2): 361–366.Google Scholar
Ghosh, A. and Morita, H. (2007), ‘Free entry and social efficiency under vertical oligopoly’, RAND Journal of Economics 38(2): 541–554.CrossRefGoogle Scholar
Gilbert, R. and Vives, X. (1986), ‘Entry deterrence and the free-rider problem’, Review of Economic Studies 172: 71–83.CrossRefGoogle Scholar
Helland, E. and Matsuno, M. (2003), ‘Pollution abatement as a barrier to entry’, Journal of Regulatory Economics 24(2): 243–259.CrossRefGoogle Scholar
Ko, I., Lapan, H.E., and Sandler, T. (1992), ‘Controlling stock externalities: flexible versus inflexible pigouvian corrections’, European Economic Review 36: 1263–1276.CrossRefGoogle Scholar
Kovenoch, D. and Roy, S. (2005), ‘Free-riding in non-cooperative entry deterrence with differentiated products’, Southern Economic Journal 72: 119–137.Google Scholar
Kuhn, K. and Vives, X. (1999), ‘Excess entry, vertical integration, and welfare’, RAND Journal of Economics 30(4): 575–603.CrossRefGoogle Scholar
Mankiw, G. and Whinston, M. (1986), ‘Free entry and social inefficiency’, RAND Journal of Economics 17(1): 48–58.CrossRefGoogle Scholar
Monty, R.L. (1991), ‘Beyond environmental compliance: business strategies for competitive advantage’, Environmental Finance 11(1): 3–11.Google Scholar
OECD (2006), ‘Environmental regulation and competition’, OECD Competition Policy Roundtables, Directorate for Financial and Enterprise Affairs, Competition Committee Paris.Google Scholar
Porter, M.E. (1991), ‘America's green strategy’, Scientific American 264(4): 168.CrossRefGoogle Scholar
Porter, M.E. and van der Linde, C. (1995a), ‘Green and competitive: breaking the stalemate’, Harvard Business Review, September–October issue.Google Scholar
Porter, M.E. and van der Linde, C. (1995b), ‘Toward a new conception of the environment–competitiveness relationship’, Journal of Economic Perspectives 9(4): 97–118.CrossRefGoogle Scholar
Ryan, S. (2012), ‘The costs of environmental regulation in a concentrated industry’, Econometrica 80(3): 1019–1061.Google Scholar
Schoonbeek, L. and de Vries, F.P. (2009), ‘Environmental taxes and industry monopolization’, Journal of Regulatory Economics 36: 94–106.CrossRefGoogle Scholar
Spence, M. (1977), ‘Entry, capacity, investment and oligopolistic pricing’, Bell Journal of Economics 10: 1–19.CrossRefGoogle Scholar
Stavins, R. (2005), ‘The effects of vintage-differentiation environmental regulation’, Discussion Paper, Resources for the Future, Washington, DC.CrossRefGoogle Scholar
Sylos-Labini, P. (1962), Oligopoly and Technical Progress, Cambridge, MA: Harvard University Press.Google Scholar
Ungson, G., James, C., and Spicer, B. (1985), ‘The effects of government regulatory agencies on organizations in high technology and woods products industries’, Academy of Management Journal 28(2): 426–445.CrossRefGoogle Scholar
Waldman, M. (1987), ‘Noncooperative entry deterrence, uncertainty and the free-rider problem’, Review of Economic Studies 54: 301–10.CrossRefGoogle Scholar
Ware, R. (1984), ‘Sunk costs and strategic commitment: a proposed three-stage equilibrium’, The Economic Journal 94: 370–378.CrossRefGoogle Scholar