Journal of Industry, Competition and Trade

, Volume 19, Issue 2, pp 313–349 | Cite as

Strategic Emission Fees: Using Green Technology to Deter Entry

  • Ana Espínola-ArredondoEmail author
  • Felix Munoz-Garcia
  • Boying Liu


We consider a sequential-move game in which a polluting monopolist chooses whether to acquire a green technology, and a potential entrant responds deciding whether to join the market and, upon entry, whether to invest in clean technology. Our paper compares two models: one in which environmental regulation is strategically set before firms’ decisions; and another where regulation is selected after firms’ entry and investment decisions. We show that a proactive regulation that strategically anticipates firms’ behavior can implement different market structures. In particular, policy makers can choose emission fees to induce competition and/or investment in clean technology, giving rise to market structures that maximize social welfare.


Green technology adoption Market structure Emission tax Strategic regulation 

JEL Classification

H23 L12 Q58 



We would like to thank Luis Gautier, Robert Rosenman, Richard Shumway, and Charles James for their helpful comments and discussions.


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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2019

Authors and Affiliations

  • Ana Espínola-Arredondo
    • 1
    Email author
  • Felix Munoz-Garcia
    • 2
  • Boying Liu
    • 3
  1. 1.School of Economic SciencesWashington State UniversityPullmanUSA
  2. 2.School of Economic SciencesWashington State UniversityPullmanUSA
  3. 3.School of Economic SciencesWashington State UniversityPullmanUSA

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