Optimal environmental policy with network effects: Is lock-in in dirty technologies possible?

Arbeitspapier

Network externalities could be present for many low or zero emission technologies. One obvious example is alternative fuel cars, whose use value depends on the network of service stations. The literature has only briefy looked at environmentally benefcial technologies. Yet, the general literature on network effects is mixed on whether governments need to intervene in order to correct for network externalities. In this paper we study implications of network effects on environmental policy in a discrete time dynamic game. Firms sell a durable good. One type of durable is causing pollution when being used, while the other type is clean. Consumers' utility increase in the number of other users of the same type of durable, which gives rise to the network effect. We find that the optimal tax depends on the size of the clean network. If starting from a situation in which the dirty network dominates, the optimal tax may exceed the marginal environmental damage, thereby charging consumers for more than just their own emissions. Applying a Pigovian tax may, on the contrary, fail to introduce a socially beneficial clean network.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Memorandum ; No. 15/2013

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Environmental Economics: Technological Innovation ; Environmental Economics: Government Policy ; Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
• Thema: Network effects ; lock-in ; enviromnetal taxes

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Greaker, Mads ; Midttømme, Kristoffer
• Ereignis: Veröffentlichung
• (wer): University of Oslo, Department of Economics
• (wo): Oslo
• (wann): 2013

Weitere Informationen

• Handle: http://hdl.handle.net/10419/90745
• Letzte Aktualisierung: 10.03.2025, 11:41 MEZ