Strategic environmental policy, international trade and self-enforcing agreements: The role of consumers' taste for variety

Michael Finus, Alaa Al Khourdajie

Research output: Contribution to journalArticlepeer-review

Abstract

We study the coordination of environmental policy within an agreement in the context of international trade. In an n-country intra-industry trade model, firms produce a horizontally differentiated good and consumers have a taste for variety. Governments choose strategically an emission tax and their membership in an international agreement. We show that only a strong taste for variety reduces the competition among governments sufficiently enough to allow for some form of policy coordination, though full cooperation will never be obtained.
Original languageEnglish
Pages (from-to)317-350
JournalStrategic Behavior and the Environment
Volume7
Issue number3-4
DOIs
Publication statusPublished - 12 Feb 2018

Keywords

  • strategic environmental policy
  • taste for variety
  • horizontal product differentiation
  • international trade
  • self-enforcing international agreements

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