This paper examines an endogenous timing game in product differentiated duopolies under price competition when emission tax is imposed on environmental externality. We show that a simultaneous-move (sequential-move) outcome can be an equilibrium outcome in a private duopoly under significant (insignificant) environmental externality, but this result can be reversed in a mixed duopoly. We also show that when environmental externalities are significant, public leadership yields greater welfare than private leadership, and that public leadership is more robust than private leadership as an equilibrium outcome. Finally, we find that privatization can result in a public leader becoming a private leader, but this worsens welfare.
This is a preview of subscription content, log in to check access.
We are very grateful to an anonymous referee for many helpful comments and suggestions. All remaining errors are ours. This work was supported by Korea Ministry of Environment (MOE) as Graduate School specialized in Climate Change and the Fundamental Research Funds for the Central Universities (3132017137, 3132017084).
Amir R, De Feo G (2014) Endogenous timing in a mixed duopoly. Int J Game Theory 43:629–658Google Scholar
Balogh TL, Tasnádi A (2012) Does timing of decisions in a mixed duopoly matter? J Econ 106:233–249CrossRefGoogle Scholar
Bárcena-Ruiz JC (2007) Endogenous timing in a mixed duopoly: price competition. J Econ 91:263–272CrossRefGoogle Scholar