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- Title
Energy tax and competition in energy efficiency: the case of consumer durables
- Authors
Conrad, K.
- Abstract
The purpose of this paper is to analyze the role of an energy tax ontechnical improvements and on prices of consumer durables induced bystrategic competition in energy efficiency. If the gasoline tax is raised this does in principle not affect the producers of cars becausethe motorist pays for it in terms of a higher cost of using the car.This, however, affects the unit sales of car producers because of substitution towards other modes of transportation. A second element ofreaction to energy price variation is an indirect one and relates tothe effect of energy prices on technology. Competition forces car producers to develop more energy efficient cars in order to reduce the cost of using a car. This indirect effect can partly offset the direct effect of higher energy prices on demand if it is profitable for the automobile industry to engineer more energy efficient equipment. Wewill analyze the impact of an energy tax on energy efficiency and onthe price of a durable good. This will be done within the framework of a duopoly competing in prices and in the energy efficiency of its products. The government chooses a welfare maximizing energy tax as an incentive to innovate. Then we will analyze a strategic two-stage decision process in which the duopolists first decide about energy efficiency and then compete in prices.
- Subjects
ECONOMICS; ENERGY consumption; ENERGY tax; ENVIRONMENTAL law; MATHEMATICAL analysis
- Publication
Environmental & Resource Economics, 2000, Vol 15, Issue 2, p159
- ISSN
0924-6460
- Publication type
Article
- DOI
10.1023/A:1008362416293