混合寡佔與環境課題之研究:消費者認知、外資持有、與工會三個主題

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(1)國立高雄大學應用經濟學系碩士論文. 混合寡佔與環境課題之研究:消費者認知、外資持有、與工會三個主題 Three Essays on Consumer Awareness, Foreign Ownership, and Union in Mixed Oligopoly with Environmental Effects. 研究生：梁嘉玲撰指導教授：王鳳生博士. 中華民國一百零一年六月.

(2) 致謝感謝我的指導老師王鳳生教授對我的諄諄教誨，您的耐心指導才能讓我順利完成論文。一次要用心的指導這麼多學生，老師，辛苦您了!還有辛苦的口試委員楊雅博、李仁耀老師給予我論文上寶貴的建議，使我的論文更加完善。以及謝謝我的朋友俊儫，在當我變得很無助時伸出援手，寫論文遇到障礙時幫助我度過難關。謝謝育維、文宏，總在我低潮時幫我打氣加油當我的出氣桶。謝謝文婷，和妳在一起的歡樂是我在研究所最美好的回憶之一。謝謝濬豪，總在我有難時當我的 Google 導向。謝謝歆雅，陪我一起度過口試。還有感謝珮瑜姐這一年來協助我們處理論文、研討會相關事宜，給我們很大的幫助。感謝耿紹勛、佘志民、柯秀欣老師給我擔任助教的機會，你們的指導我會謹記在心，還有辛苦的姿宇姐。還要謝謝學弟妹們，平時對學長姐的關心。謝謝我在高雄的朋友們，在課業之餘約我出去玩樂。最後當然最感謝我的父母，謝謝你們栽培我到研究所畢業，我一定會盡我所能的孝順你們，努力成為你們的驕傲。. 梁嘉玲謹誌於國立高雄大學中華民國一百零一年仲夏.

(3) 混合寡佔與環境課題之研究:消費者認知、外資持有、與工會三個主題指導教授：王鳳生博士國立高雄大學應用經濟系. 學生：梁嘉玲國立高雄大學應用經濟系. 摘要針對逐漸被重視的環境議題，我們考慮在混合寡佔市場與環境課題下分析消費者認知、外資持有、工會與其搭配環境政策對產出、利潤、社會福利及環境的影響。首先分析在雙佔市場下存在消費者環境認知，民營化會對環境與社會福利造成的影響。我們發現民營化會改善環境且增進社會福利。其次分析在混寡市場下外資持有之影響，我們分成兩種情況: 第一、全部的民營廠商都允許外資進入，第二、只有部分的民營廠商允許外資進入。我們發現在第一種情況下，由社會福利的觀點，外資進入時環境會得以改善但卻傷及社會福利。在第二種情況下，外資的進入不僅僅可以改善環境，也增進了社會福利。再者我們分析若工會在決定工資時會考慮到環境的損害，且考慮環境稅，在混寡模型中，進而討論民營化是否對環境與社會福利有好處。首先，工會談判，工資將隨著邊際環境損害增加而增加。其次，在存有環境稅時，聯合工會決定出的工資將低於個別工會決定出的。最後，對環境有環境意識的工會在談判時，當廠商間的生產力差異越小，個別工會下的社會福利會小於聯合工會下的社會福利。關鍵字：消費者認知、外資持有、工會、環境政策、民營化. I.

(4) Three Essays on Consumer Awareness, Foreign Ownership, and Union in Mixed Oligopoly with Environmental Effects Advisor: Dr. Leonard F.S. Wang Department of Applied Economics National University of Kaohsiung. Student: LIANG, CHIA-LING Department of Applied Economics National University of Kaohsiung. ABSTRACT In recent years, the environmental problem of pollution emissions has been well recognized both in the real world and in the literature of economics. In addition, the public became more concerning about the environmental issues. This thesis, examines three topics with environmental effect in mixed oligopoly: How will consumers` environmental awareness, foreign ownership, and union with environmental policy affect output, profit, social welfare and environment. It further discuss whether privatization improves the environment and social welfare or not in a mixed oligopoly. Firstly, we examine the impact of an emission tax in a mixed duopolistic model characterized by consumers’ environmental awareness and produce differentiation. The purpose is to examine whether privatization improves the environment and social welfare or not in a mixed duopolistic model. We show that in mixed duopoly with emission tax and consumers` environmental awareness, the privatization will improve the environment and the welfare in a mixed duopolistic model. II.

(5) Secondly, we investigate the effects of foreign ownership of a domestic firm on the establishment of environmental policy under a mixed oligopolistic market. With regard to the ownership of the private firms, we analyze two cases: (i) the private firms completely owned by the foreign investors and (ii) the private firms partially owned by the foreign investors. We find that when the private firm is completely owned by the foreign investor, it will decrease social welfare under environmental policy which indicates the robust of the result obtained in Ohori (2011). However, when the private firm partially owned by the foreign investor, it will improve the environment and social welfare. Finally, we explored the implications of the environment-concerned union bargaining and firm heterogeneity in mixed oligopoly. The results obtained are the following. Firstly, regardless the type of union bargaining, the wage will increase when the marginal environment damage increases. Secondly, when an emission tax is imposed, centralized wage will be lower than the decentralized wages. Lastly, under the environment-concerned union bargaining, when an emission tax is imposed and the productivity spread between firms is narrower, the social welfare under decentralized wages will be less than the social welfare under centralized wages.. Keywords: Consumers` environmental awareness, Foreign ownership, Union, emission tax, Privatization. III.

(6) CONTENTS CHAPTER ONE: INTRODUCTION ............................................................. 1 1.1 Research Background ...................................................................................................... 1 1.2 Literature Review ............................................................................................................ 2. CHAPTER TWO: Emission Taxes, Environmental Awareness and Social Welfare in a Mixed Duopoly .................................................................. 6 2.1 Basic Model ..................................................................................................................... 6 2.2 Environmental policies in mixed duopoly ....................................................................... 8 2.3 Environmental policies in pure duopoly........................................................................ 10 2.4 Privatization, welfare and social efficiency................................................................... 12 2.5 Concluding Remark ....................................................................................................... 13. CHAPTER THREE: Foreign Ownership and Environmental Taxes in a Mixed oligopoly ............................................................................................. 15 3.1 Base Model .................................................................................................................... 15 3.2 Case (i) .......................................................................................................................... 16 3.2.1 Welfare Comparison................................................................................................... 19 3.3 Case (ii) ......................................................................................................................... 20 3.3.1 Welfare Comparison................................................................................................... 23 3.4 Conclusion ..................................................................................................................... 25. CHAPTER FOUR: Union, Environment-Concerned Wage Bargaining and Social Welfare in Mixed Oligopoly ................................. 27 4.1 Base Model .................................................................................................................... 27 4.2 The firms choose the output in mixed oligopoly ........................................................... 29 4.2.1 The unions choose the decentralized wage................................................................. 29 4.2.2 The government decides the emission tax .................................................................. 30 4.3The pure oligopoly and emission tax.............................................................................. 32 4.4 Comparisons of the two cases considered above........................................................... 33 4.5 Conclusions ................................................................................................................... 35. CHAPTER FIVE: CONCLUSIONS ............................................................. 36 IV.

(7) References ................................................................................................................ 38. V.

(8) CHAPTER ONE: INTRODUCTON 1.1 Research Background Recently, economic growth with the climate change and Greenhouse effect, public became more and more concern about environmental issues. Environmentalists won the 2007 Nobel Peace Prize, governments around the world “placed global warming and greenhouse gas reduction as one of highest priorities” (Pelosi, 2008), and business executives put the issues related to the environment at the top of their agendas. The global nature of the environmental problem of pollution emissions has been well recognized both in the real world and in the literature of economics. In order to regulate the environment, environmental policy is usually divided into direct control or indirect control. The government sets pollution standards or imposes environmental taxes to control pollution. The government respond to environmental damage, but also take into account of consumer`s behavior. We found that “environmental protection” had become an important consideration among consumers when making a purchase. When making a purchase the two foremost elements of consideration among Taiwanese consumers are environmental friendliness and price. There are evidences showing that some consumers care about the environment and are more willing to buy a products deemed to be environmentally sound. For example, oil is the most important energy resources and business in this century. It is vital for the economy development around the world. The oil refining industry in Taiwan is mainly controlled by CPC Corporation, which is a public firm, and Formosa Petrochemical Corporation (FPCC) is another private firm sharing the domestic market. The domestic petrol distribution station in domestic market is also 1.

(9) dominated by these two firms. And we noticed that when the consumer has the environmental awareness, he will prefer CPC to FPCC`s oil. Because there are a few news reporting that CPC`s oil are more pure than FPCC`s, on the other hand, CPC`s oil are more environmental friendly than FPCC`s. We can see that environmental consciousness made a great impact on consumer. In pace with the globalization of the world economy continued over the last decade, we can see a lot of the phenomenon of multinational investment. That is in order to enhance the competitive power of domestic industry; government tries to open economy to attract foreign entry. And it may deterioration of the domestic environment. But with the open economy and public awareness of the environment, the government may choose the foreign investor with environmental consciousness. How the Government to strike a balance between economy and environment, it’s become an important issue. Concerns about environmental quality have always been important in the decisions of governments. The link between environmental regulation, the labor market and international trade is widely acknowledged. In this context, environmental regulation by governments may reduce environmental pollution. And the wage should consider the environment damage to compensate the labor who work in adverse circumstances. But it can also exacerbate the problem of environment. This is an important issue in policy debates on environmental regulation.. 1.2 Literature Review The literature on the environmental issue, Simpson (1995) derived the optimal pollution for a Cournot duopoly and found that if firms have different production costs, the optimal tax rate may exceed the marginalal damage. Katsoulacos and 2.

(10) Xepapadeas (1995) proved that the tax rate is higher than the marginalal damage, when the number of firms corresponds to the second best optimum. There are many literature has been discussed environmental policy in mixed oligopoly. Bárcena-Ruiz and Garzón (2006) explored how the decision on whether to privatize a public firm or not with environmental policy, and showed that when the government sets a tax to protect the environment, the tax is lower in a mixed oligopoly than in a private one, and that the environmental damage is greater. These papers did not consider the role of product differentiation in a pure or mixed oligopoly. Wang and Wang (2009) re-examined whether privatization improves (or deteriorates) the environment in a mixed duopolistic framework with differentiated product and pollution abatement. It is shown that, due to privatization, less attention is paid to pollution abatement by all the firms coupled with less environment taxes levied by the government, and the environment is more damaged when the product is less substitutable. When the product is highly substitutable, social welfare deteriorates accompanied with the privatization. In recent years many studies focused on the privatization issue and related environmental policy. Beladi and Chao (2006) discussion the case of a monopoly partially privatized firm generates pollution emissions. It shows that privatization can have a negative effect on the environment. Due to profit maximization directly lowers output but the reduced tax rate gives a positive effect on output. So that privatization may harms the environment. The environmental awareness of individuals has been incorporated into the analysis in the literature. Rodriguez-Ibeas (2007) have considered a duopolistic model of environmental product differentiation with two types of consumers (green and brown) to analyze how environmental awareness affects the environment. Yakita (2009) 3.

(11) assumed that an environmentally-friendly technology not only reduces pollution emissions but also strengthens the preference of consumers for goods produced with such a technology. Wang et. al. (2011) investigate the optimal environmental and privatization policies in a mixed oligopoly, wherein firms produce differentiated goods with environmental damage that is measured by government and observed by consumers. Few studies have considered foreign ownership, privatization, and environmental policies. Wang and Chen (2011) examine the impact of foreign penetration on privatization in a mixed oligopolistic market. It showed that government should increase the degree of privatization along with an increasing proportion of domestic stockholding of multinational firms. Furthermore, an increase in domestic ownership of multinational firms raises all domestic private firms' profit and social welfare. Ohori (2011) investigates the effects of foreign ownership of a domestic firm on the establishment of environmental policy under an oligopolistic market. Find that foreign ownership restriction leads to low environmental tax rates and an increase in welfare. In an open economy with consumption externalities, Wang et al. (2007) investigated the optimal environmental tax and the environmental effect of trade liberalization in a mixed oligopoly and pure oligopoly, wherein firms produce the differentiated goods and the environmental damage is associated with consumption. It demonstrated that when the domestic market increases its openings, the tariff reduction does not always bring positive effects on the environment in mixed oligopoly; but, in pure oligopoly with homogeneous goods, the tariff reduction is bad for the environment. Chao and Yu (2007) examined the effects of trade liberalization on firm ownership and the environment. It is found that tariff reduction can result in a switch in firm ownership from domestic to foreign, coupled with a lower pollution 4.

(12) tax. The literature on wage bargaining has focused mainly on two structures. In one, each firm negotiates with an independent union at firm level (decentralization) and in the other each firm bargains with an industry-wide union (centralization). Assuming simultaneous negotiations, Horn and Wolinsky (1988) and Davidson (1998) show that a centralized negotiation results in higher wages than a decentralized one since the bargaining strength of the workers is greater; therefore, workers prefer centralized bargaining while firms prefer decentralized bargaining. Bárcena-Ruiz (2003) extends the analysis to study the bargaining structure preferred by governments. The literature on the environment does not consider that workers can adopt different organizational structures to set wages (see, for example, Ulph 1996). On the other hand, the literature on wage bargaining does not take into account that firms pollute the environment. In order to close this gap and take into account the relationship between environmental policy and the labour market, Bárcena-Ruiz and Garzón (2009) analyze the choice of environmental taxes by governments in a two-country trade setting and show that under a decentralized structure governments choose environmental taxes closer to those which are socially efficient than those chosen under a centralized structure. Wang et. al.(2012) explored the design of environmental policy under the consideration of union bargaining and firm heterogeneity in oligopoly.. 5.

(13) CHAPTER TWO: Emission Taxes, Environmental Awareness and Social Welfare in a Mixed Duopoly In this chapter, we examine the impact of an emission tax in a mixed duopolistic model characterized by consumers’ environmental awareness and produce differentiation. The purpose is to examine whether privatization improves the environment and social welfare or not in a mixed duopolistic model. We show that in mixed duopoly with emission tax and consumers` environmental awareness, the privatization will improve the environment and the welfare in a mixed duopolistic model.. 2.1 Basic Model We consider an economy in which there exists one public firm (indexed by 0) and one private firm (indexed by 1), producing horizontally differentiated and homogeneous goods both of which are produced from labor. The utility function of each individual is given as 1. ∅. 𝑈 = 𝐴(𝑞0 + 𝑞1 ) − 2 (𝑞0 2 + 2𝜃𝑞0 𝑞1 + 𝑞1 2 ) + 𝐼 − 2 (𝑞0 + 𝑞1 )2. (2.1). We assumed that the production of this good in both public and private firms leads to pollution, 𝑒0 = 𝑞0 − 𝑎0 and 𝑒1 = 𝑞1 − 𝑎1 , where 𝑎0 𝑎𝑛𝑎 𝑎1 are the pollution. abatement of each firm. The consumers realize not only their own consumption but. also other consumers’ consumption will damage the environment. Hence, the total consumption Q will reduce consumers’ utility level from cognizable. ∅ 2. Q2 that will. affect the WTP for the concerned goods. Where ∅ is the coefficient of the marginal. damage from consumption pollution, which denotes the private cognition of pollution damage and consumers’ awareness of environmental damage, and ∅ > 0 . The 6.

(14) parameter 𝜃 ∈ (0, 1) denotes an inverse measure of the degree of horizontal product differentiation between varieties 𝑞0 and 𝑞1 . The two varieties of the good are. independent when 𝜃→ 0, while they become perfect substitutes as 𝜃 → 1. And I is. the composite homogeneous good. The environmental awareness of an individual is described by his sensitivity to environmental friendliness in consuming the good, i.e., environmental quality of the goods (Yakita and Yamauchi, 2010). The game runs as follows. In the first stage, the government chooses a tax rate to maximize SW. In the second stage, after observing t, the public and private firms choose their outputs and abatements simultaneously (Cournot competition). 𝑝0 = 𝐴 − (1 + ∅)𝑞0 − (𝜃 + ∅)𝑞1. (2.2). 𝑝1 = 𝐴 − (𝜃 + ∅)𝑞0 − (1 + ∅)𝑞1. (2.3) 1. Environmental damage is measured by the quadratic form GED = 2 (𝑒0 + 𝑒1 )2. which is the government measure.. Each firm has to pay an emission tax t per unit of. pollutant, 𝑇 = 𝑡(𝑒0 + 𝑒1 ) is the total taxes collected by the government. The cost function is measured by a quadratic form,. 1. 𝑞 2 and 2 0. The cost of pollution abatement of public firm is The profit functions are,. 1 2. 1. 𝑞 2 1. 2. for public and private firms.. 𝑎0 2 , respectively.. 1. 1. (2.4). 1. 1. (2.5). 𝜋0 = 𝑝0 𝑞0 − 2 𝑞0 2 − 2 𝑎0 2 − 𝑡𝑒0 𝜋1 = 𝑝1 𝑞1 − 2 𝑞1 2 − 2 𝑎1 2 − 𝑡𝑒1. As in Bárcena-Ruiz and Garzón (2002, 2006), the social welfare is the sum of the consumer surplus, the firm’s profit, and the total tax revenue minus the environmental damage measured by the environment authority, SW = CS + 𝜋0 + 𝜋1 + 𝑇 − 𝐺𝐺𝐺. (2.6). where CS represents the consumer surplus, 7.

(15) CS = 𝑈 − (𝑝0 )𝑞0 − (𝑝1 )𝑞1. (2.7). In the first stage, the government chooses a tax rate to maximize SW. In the second stage, after observing t, the public firm is maximizing the SW and the private firms are maximizing its own profit. (Superscript M represents the equilibrium of mixed duopoly).. 2.2 Environmental policies in mixed duopoly In the market stage, the public firm maximizes 𝑆𝑆,. private firms maximize its own profit, conditions, we have. 𝜕𝜋1 𝜕𝑞1. 𝜕𝜋. 𝜕𝜕𝜕 𝜕𝑞0. = 0,. 𝜕𝜕𝜕 𝜕𝑎0. = 0 ,and the. = 0, 𝜕𝑎1 = 0, From the first-order 1. 𝐴(−5+2𝜃−2∅)−2𝑡(2+𝜃+2∅). (2.8). 𝐴(−5+2𝜃)+𝑡(5+𝜃+3∅). (2.9). 𝑞0 𝑀 = −15+𝜃+2𝜃2 +4𝜃∅−∅(15+2∅) 𝑞1 𝑀 = −15+𝜃+2𝜃2 +4𝜃∅−∅(15+2∅) 𝑎0 𝑀 =. 𝐴(−5+2𝜃−∅)−𝑡(−8+𝜃+𝜃 2 +2𝜃∅−∅(7+∅)). 𝑎1 𝑀 = 𝑡. (2.10). −15+𝜃+2𝜃 2 +4𝜃∅−∅(15+2∅). (2.11). Differentiating (2.10) and (2.11) with respect to t , we obtain 𝜕𝑞0 𝑀 𝜕𝜕. 𝜕𝑞0 𝑀 𝜕∅. 𝜕𝑞1 𝑀 𝜕𝜕. 𝜕𝑞1 𝑀 𝜕∅. 𝜕Q𝑀 𝜕𝜕. 𝜕Q𝑀 𝜕∅. 2(2+𝜃+2∅). = − −15+𝜃+2𝜃2 +4𝜃∅−∅(15+2∅) < 0 =−. 𝐴(45+12𝜃2 +4∅(5+∅)−8𝜃(6+∅))+2𝑡(4∅(2+∅)+𝜃(9+4∅)) (−15+𝜃+2𝜃 2 +4𝜃∅−∅(15+2∅))2. 5+𝜃+3∅. = −15+𝜃+2𝜃2 +4𝜃∅−∅(15+2∅) < 0 =. <0. (2.13) (2.14). −𝐴(−5+2𝜃)(−15+4𝜃−4∅)+2𝑡(15−𝜃+𝜃 2 +2(5+𝜃)∅+3∅2 ) (−15+𝜃+2𝜃 2 +4𝜃∅−∅(15+2∅))2. −1+𝜃+∅. = − −15+𝜃+2𝜃2 +4𝜃∅−∅(15+2∅) < 0 =. (2.12). <0. 2(−𝐴(𝜃(−49+10𝜃)−8𝜃∅+2∅2 +20(3+∅))+𝑡(𝜃 2 −(−5+∅)(3+∅)−2𝜃(5+∅))) (−15+𝜃+2𝜃 2 +4𝜃∅−∅(15+2∅))2. 8. (2.15) (2.16) <0.

(16) Lemma 2.1. In a mixed duopoly with emission tax, the output of public firm and the private firm are decreasing in 𝑡. And the output of public firm and the private firm. are both decreasing in ∅. This result is expectable, because the product will lead to pollution.. We see that in the environmental policy stage, using the results in the market stage, the government sets the emission tax to maximize social welfare, and solving the first-order condition and given the satisfaction of second-order condition, gives the short-run optimal emission tax: 𝑡𝑀 =. 𝐴((5−2𝜃)2 (3+𝜃)+(70+𝜃(−45+8𝜃))∅+(13−2𝜃)∅2 +2∅3 ). 435+6𝜃4 +4𝜃3 (1+6∅)+𝜃 2 (−107+∅(−91+12∅))+∅(799+∅(463+∅(89+6∅)))−2𝜃(25+∅(132+∅(103+12∅))). (2.17). Differentiating (2.17) with respect to ∅ , we obtain. 𝜕𝑡 𝑀 𝜕∅. < 0. The reasoning. behind these results is due to that when the consumer has the environmental awareness, it will improve the environment.. In a mixed duopoly with emission tax, in equilibrium, the optimal emission tax, the output level, the profit of each firm, the consumer surplus, environmental damage, respectively: 𝐴(3+2∅)(17−𝜃+4∅(4+∅)). 𝑞0 𝑀 = 98−𝜃2 (4+3∅)−2𝜃(−2+∅+2∅2)+∅(7+2∅)(31+4∅(4+∅)) 𝐴(−2+𝜃)(−17+𝜃−4∅(4+∅)). 𝑞1 𝑀 = − −98+𝜃2(4+3∅)+2𝜃(−2+∅+2∅2 )−∅(7+2∅)(31+4∅(4+∅)) 𝑄𝑀 =. 2(90𝐴−21𝐴𝐴+𝐴𝜃 2 +78𝐴∅−4𝐴𝐴∅−𝐴𝜃2 ∅+22𝐴∅2 +𝐴𝐴∅2 +2𝐴∅3 ) 62−𝜃2 (4+3∅)−2𝜃(−2+∅+2∅2 )+∅(7+2∅)(19+∅(9+2∅)) 𝑍. 𝜋0 𝑀 = (2(98−𝜃2 (4+3∅)−2𝜃(−2+∅+2∅2 )+∅(7+2∅)(31+4∅(4+∅)))2 ) 𝜋1 𝑀 =. 𝐴2 (𝜃−2)2 (𝜃2 (∅(9∅+26)+19)−2𝜃(∅(∅(2∅+33)+84)+59)+∅(∅(4∅(∅(8∅+77)+293)+2257)+2206)+871) (2(98−𝜃2 (4+3∅)−2𝜃(−2+∅+2∅2 )+∅(7+2∅)(31+4∅(4+∅)))2 ). 9.

(17) V. GED𝑀 = (2(98−𝜃2 (4+3∅)−2𝜃(−2+∅+2∅2 )+∅(7+2∅)(31+4∅(4+∅)))2 ) SW𝑀 =. 2𝑀(𝜃2 (3∅+4)+2𝜃(2∅2 +∅−2)−∅(2∅+7)(4∅(∅+4)+31)−98)−𝐴2 (2∅+3)(𝜃(3𝜃−14)+4∅(∅+4)+31) 2(𝜃2 (3∅+4)+2𝜃(2∅2 +∅−2)−∅(2∅+7)(4∅(∅+4)+31)−98). (2.18). 𝑍 = (𝐴2 (2617 + 𝜃 4 (22 + ∅(28 + 9∅)) − 2𝜃 3 (148 + ∅(5 + ∅)(43 + 10∅)) − 8∅(−610 +. ∅(−293 + 2∅(63 + 4∅(22 + ∅(8 + ∅))))) + 𝜃 2 (2283 + ∅(4980 + ∅(4489 + 4∅(545 + ∅(145 + 16∅))))) + 2𝜃(−1927 + ∅(−3697 + 4∅(−557 + 2∅(1 + ∅(71 + 30∅ + 4∅2 ))))))). V = (𝐴2 (9(31 + 𝜃(−14 + 3𝜃))2 + (13235 + 𝜃(−10708 + 𝜃(4794 + 𝜃(−964 + 107𝜃))))∅ +. 4(226 + 𝜃(−445 + 𝜃(469 − 75𝜃 + 9𝜃 2 )))∅2 + 4(−2667 + 𝜃(984 + 𝜃(17 + 2𝜃)))∅3 − 16(595 +. 4(−42 + 𝜃)𝜃)∅4 − 16(239 + (−44 + 𝜃)𝜃)∅5 + 64(−12 + 𝜃)∅6 − 64∅7 )). Lemma 2.2. In mixed duopoly: 𝜕GED𝑀 𝜕∅. 𝜕GED𝑀 𝜕𝜕. <0 , <0 ,. 𝜕SW𝑀 𝜕∅. 𝜕SW𝑀 𝜕𝜕. >0. (2.19). <0. (2.20). From (2.19) and (2.20), we obtain that the environmental damage is decreasing in ∅ , but the social welfare is increasing in ∅. Both environmental damage and social. welfare are decreasing in 𝜃.. 2.3 Environmental policies in pure duopoly In the first stage, the government chooses a tax rate to maximize SW. In the second stage, after observing t, both firms are maximizing its own profit. (Superscript P represents the equilibrium of pure duopoly). 𝜕𝜋. In the market stage, the firm 0 maximizes its own profit, 𝜕𝑞0 = 0, 𝜕𝜋. firm 1maximize its own profit, 𝜕𝑞1 = 0 , have. 1. 𝜕𝜋1 𝜕𝑎1. 10. 0. 𝜕𝜋0 𝜕𝑎0. = 0,and the. = 0. From the first-order conditions, we.

(18) 𝐴−𝑡. 𝑞0𝑃 = 𝑞1𝑃 = 𝑞 𝑃 = 3+𝜃+3∅. (2.21). 𝑎0𝑃 = 𝑎1𝑃 = 𝑎𝑃 = 𝑡. (2.22). Differentiating (2.21) and (2.22) with respect to t , we obtain 𝜕𝑞0 𝑝 𝜕𝜕. 𝜕Q𝑝 𝜕𝜕. −1. = 3+𝜃+3∅ < 0. (2.23). −2. = 3+𝜃+3∅ < 0. (2.24). We see that in the environmental policy stage, using the results in the market stage, the government sets the emission tax to maximize social welfare, and solving the first-order condition and given the satisfaction of second-order condition, gives the short-run optimal emission tax: 𝐴(1+∅). 𝑡 𝑝 = − 𝜃2 +𝜃(7+6∅)+(1+∅)(11+9∅). (2.25). Differentiating (2.28) with respect to ∅ , we obtain 𝜕𝑡 𝑃 𝜕∅. 𝐴(𝜃+𝜃2 −9(1+∅)2 ). = − (𝜃2 +𝜃(7+6∅)+(1+∅)(11+9∅))2 > 0. (2.26). In a pure duopoly with consumers` environmental awareness, from (2.25) and (2.26), the government should give the subsidy of the abatement and shouldn`t impose emission tax. Lemma 2.3. In a private duopoly with environment tax, in equilibrium, the optimal environmental tax, the output level, the profit of each firm, the consumer surplus, environmental damage and social welfare are, respectively: 𝐴(4+𝜃+3∅). 𝑞0 𝑝 = 𝜃2 +𝜃(7+6∅)+(1+∅)(11+9∅) 𝐴(4+𝜃+3∅). 𝑞1 𝑝 = 𝜃2 +𝜃(7+6∅)+(1+∅)(11+9∅) 𝜋0 𝑝 = 𝜋1 𝑝 =. 𝐴2 (49+𝜃2 (3+2∅)+2𝜃(3+2∅)(4+3∅)+2∅(53+∅(38+9∅))) 2(𝜃 2 +𝜃(7+6∅)+(1+∅)(11+9∅))2. 𝐴2 (49+𝜃2 (3+2∅)+2𝜃(3+2∅)(4+3∅)+2∅(53+∅(38+9∅))) 2(𝜃 2 +𝜃(7+6∅)+(1+∅)(11+9∅))2. 11.

(19) 2𝐴2 (5+𝜃+4∅)2. GED𝑝 = (𝜃2 +𝜃(7+6∅)+(1+∅)(11+9∅))2 𝐴2 (5+𝜃+4∅). SW 𝑝 = 𝜃2 +𝜃(7+6∅)+(1+∅)(11+9∅). (2.29). Lemma 2.4. In mixed duopoly with regulated entry: 𝜕GED𝑃 𝜕∅. 𝜕GED𝑃 𝜕𝜕. <0 , <0 ,. 𝜕SW𝑃 𝜕∅. 𝜕SW𝑃 𝜕𝜕. <0 <0. (2.30). From (2.30), we obtain that the environmental damage is decreasing in ∅ , and the. social welfare is, because of the subsidy. Both environmental damage and social welfare are decreasing in 𝜃. 2.4 Privatization, welfare and social efficiency In this section, we compare the output, emission tax, environmental damage and the welfare. Proposition 2.1. In equilibrium, (1) 𝑞o 𝑀 > 𝑞 𝑃 > 𝑞1 𝑀 (2) Q𝑀 > 𝑄 𝑃. (2.31). When the public firm is privatized, the market becomes more competitive , thus the private firm increases its output level (𝑞 𝑃 > 𝑞1 𝑀 ). In the mixed duopoly, the higher. output level of the public firm offsets the lower output level of the private firms and,. as a result, the output of industry is higher in the mixed duopoly than in the private duopoly (Q𝑀 > 𝑄 𝑃 ). The above results are in conformity with that obtained in mixed oligopoly in which all firms produce a homogeneous good (Bárcena-Ruiz and Garzón 2006). Proposition 2.2. In equilibrium, (1)𝑎𝑀 = 𝑡𝑀 > 𝑎𝑝 = 𝑡𝑝. 12.

(20) (2)𝐶𝐶 𝑀 > 𝐶𝐶 𝑃. (2.32). Intuitively, the higher output in the mixed duopoly induces higher abatement than does private duopoly; hence, emission tax is higher in the mixed than in the private duopoly. Owing to Proposition 2.1, the output of industry is higher in the mixed than in the private duopoly, which leads to higher consumer surplus in the mixed than in the private duopoly. We compare the environmental damage differences before and after the public firm is privatized.. and. GEDM − GEDP < 0 𝜕(GEDM −GEDP ) 𝜕∅. (2.33). >0. (2.34). From (2.33) and (2.34), we infer that the privatization will improve the environment in a mixed duopolistic model. Now, we compare the welfare differences before and after the public firm is privatized. SW M − SW P < 0. (2.35). and. 𝜕(SWM −SWP ) 𝜕∅. >0. (2.36). Proposition 2.3. In mixed duopoly with emission tax and consumers` environmental awareness, the privatization will improve the environment and the welfare in a mixed duopolistic model.. 2.5 Concluding Remark In this chapter, we examine the impact of an emission tax in a mixed duopolistic 13.

(21) model characterized by consumers’ environmental awareness and produce differentiation. The purpose is to examine whether privatization improves the environment and social welfare or not in a mixed duopolistic model. We show that in mixed duopoly with emission tax and consumers` environmental awareness, the privatization will improve the environment and the welfare in a mixed duopolistic model.. 14.

(22) CHAPTER THREE: Foreign Ownership and Environmental Taxes in a Mixed oligopoly The study investigate the effects of foreign ownership of a domestic firm on the establishment of environmental policy under a mixed oligopolistic market. With regard to the ownership of the private firms, we analyze two cases: (i) the private firms completely owned by the foreign investors and (ii) the private firms partially owned by the foreign investors. We find that when the private firm is completely owned by the foreign investor, it will decrease social welfare under environmental policy which indicates the robust of the result obtained in Ohori (2011). However, when the private firm partially owned by the foreign investor, it will improve the environment and social welfare. 3.1 Base Model Consider a mixed oligopoly market where one domestic public firm (indexed 0) and n private firms (firm i) which owned by the foreign investors. The firms produce a homogeneous good. Let 𝑞0 and 𝑞𝑖 be the quantities of firm 0 and firm i,. respectively. The inverse-demand function is linear 𝑝 = 𝐴 − 𝑞0 − ∑𝑛𝑖=0 𝑞𝑖 where. A > 0 is a measure of market size and 𝑄 = 𝑞0 + ∑𝑛𝑖=0 𝑞𝑖 denotes the total output.. The production of the good leads to pollution. However, each firm can prevent pollution by undertaking abatement measures, and here we assume the foreign. investors are more care about environment than the domestic firms. And we denotes the production of this good in both public and private firms leads to pollution, 𝑒0 = 𝑞0 − 𝑎0 and 𝑒𝑖 = 𝑞𝑖 − 𝑎𝑖 , j = 0,1, … . , n. Environmental damage is measured 1. by the quadratic form GED = 2 (𝑒0 + ∑𝑛𝑖=1 𝑒𝑖 )2 which is the government measure.. 1. 1. We assume that the cost function of firm i is given by 𝑐𝑗 = 2 𝑞𝑗 2 + 2 𝑘𝑗 𝑎𝑗 2 , where 15.

(23) 𝑘𝑗 denotes the efficiency parameter of the variable costs of production. Suppose that the investment by foreign investors into firm i lead to more efficient abatement. technology relative to firm i. Then, we assume 𝑘0 = 1 and 𝑘𝑖 = 1 − 𝛼, where. 𝛼 ∈ (0,1) represents the share of foreign capital ownership in firm i. Each firm has to pay an environmental tax t per unit of pollutant, 𝑇 = 𝑡(𝑒0 + ∑𝑛𝑖=1 𝑒𝑖 ) is the total taxes collected by the government, where t denotes the environmental tax rate. The profit functions for firms 0 and i are given as 1. 1. 𝜋0 = 𝑝𝑞0 − �2 𝑞0 2 + 2 𝑎0 2 � − 𝑡𝑒0 1. (3.1). 1. 𝜋𝑖 = 𝑝𝑞𝑖 − �2 𝑞𝑖 2 + 2 (1 − 𝛼)𝑎𝑖 2 � − 𝑡𝑒𝑖. (3.2). SW = CS + 𝜋0 + (1 − 𝛼) ∑𝑛𝑖=1 𝜋𝑖 + 𝑇 − GED. (3.3). the social welfare net of the environmental damage is defined as. 1. the first term of the RHS of (3.3) represents the consumer surplus CS = 2 Q2 .. The sequence of the three stage game is described as follows: The government. maximizes social welfare to choose the optimal environmental tax t, in the first stage. In the second stage, each firm simultaneously maximizes its objective function, G for the public firm and π for private firm, to choose its quantity and abatement. We solved by using the backward induction method to get a Sub-game Perfect Nash equilibrium (SPNE). The solution satisfies the properties of the Cournot–Nash equilibrium. In this section, we derive the optimal equilibrium in cases (i) and (ii).. 3.2 Case (i) We first consider the case that the private firms completely owned by the foreign investors. In the first stage, the government chooses a tax rate to maximize SW. In the second 16.

(24) stage, after observing t, we follow the Wang and Wang (2009), the objective function of the public firm is CS and its own profit 𝐺 = CS + 𝜋0 , and the private firms are. maximizing its own profit. In the market stage, the public firm maximizes 𝐺 = CS + 𝜕𝜕. 𝜕𝜕. 𝜋0 , 𝜕𝑞 = 0,. 𝜕𝑎0. 0. 𝜕𝜋. = 0 ,and the private firms maximize its own profit, 𝜕𝑞𝑖 = 0, 𝑖. 𝜕𝜋𝑖 𝜕𝑎𝑖. =. 0 From the first-order conditions, we have (Superscript F represents the equilibrium of case (i)). 𝑞0𝐹 =. 𝐴−𝑡. 𝑎𝑜𝐹 = 𝑡. (3.4). 2. (3.5). 𝐴−𝑡. (3.6). 𝑡. (3.7). 𝑞𝑖𝐹 = 4+2𝑛 𝑎𝑖𝐹 = 1−𝛼. And differentiating (3.4) ~ (3.7)with respect to 𝛼 , we obtain 𝜕𝑞0𝐹 𝜕𝜕. 𝜕𝑎𝑜𝐹 𝜕𝜕. 𝜕𝑞𝑖𝐹 𝜕𝜕. 𝜕𝑎𝑖𝐹 𝜕𝜕. =0. =0. =0. 𝑡. = (1−𝛼)2 > 0. (3.8). The reasoning behind these results is because of our assumption, foreign ownership increases the abatement effort of firm i. In the first stage, the government sets environmental tax to maximize the social welfare. We substitute (3.4) ~ (3.7) into social welfare thus social welfare is given by K. 𝑆𝑆 𝐹 = 8(2+𝑛)2 (−1+𝛼)2. (3.9). 𝐾 = {𝐴2 (1 − 𝛼)2 �4 − 𝑛(−3 + 𝑛 + 3𝛼)� + 2𝐴𝐴(1 − 𝛼) �12(1 − 𝛼) +. 𝑛�29 + 4𝑛2 + 𝑛(21 − 9𝛼) − 3𝛼(6 + 𝛼)�� − 𝑡 2 �4𝑛4 + 60(1 − 𝛼)2 − 17.

(25) 4𝑛3 �−9 + 𝛼(4 + 𝛼)� + 𝑛(1 − 𝛼)�−141 + 𝛼(58 + 3𝛼)� − 𝑛2 �113 − 𝛼(106 − 9𝛼)��}. Differentiating it with respect to t, we obtain the optimal environmental tax 𝛾. 𝑡𝐹 = 𝑍. (3.10). 𝛾 = (𝐴(−1 + 𝛼)(12(−1 + 𝛼) + 𝑛(−29 − 4𝑛2 + 3𝛼(6 + 𝛼) + 3𝑛(−7 + 3𝛼)))). 𝑍 = (4𝑛4 + 60(−1 + 𝛼)2 − 4𝑛3 (−9 + 𝛼(4 + 𝛼)) + 𝑛(−1 + 𝛼)(−141 + 𝛼(58 + 3𝛼)) + 𝑛2 (113 + 𝛼(−106 + 9𝛼))). Differentiating (3.10) with respect to α , we obtain 𝜕𝑡 𝐹 𝜕𝜕. <0. (3.11). Proposition 3.1 Consider the situation of environmental taxes in mixed oligopoly. Then, the equilibrium environmental tax rate decreases as the share of foreign capital ownership in firm i. Because when the share of foreign capital ownership in firm i increase that is mean the abatement cost decrease. Then we compare the optimal output, abatement, total taxes, and environmental damage: Lemma 3.1 By comparing the equilibrium values of 𝛼 = 0 (there has no foreign. ownership) and 𝛼 = 1 (the private firm owned by foreign investor), we obtain the following results.. 𝑡 𝛼=0 > 𝑡 𝛼=1. 𝑞0 𝛼=1 > 𝑞0 𝛼=0 > 𝑞𝑖 𝛼=1 > 𝑞𝑖 𝛼=0. 𝑎𝑖 𝛼=1 > 𝑎𝑖 𝛼=0 > 𝑎0 𝛼=𝑜 > 𝑎0 𝛼=1 𝑄 𝛼=1 > 𝑄 𝛼=0 𝑇 𝛼=0 > 𝑇 𝛼=1. 18.

(26) 𝜋0 𝛼=1 > 𝜋0 𝛼=0 𝜋𝑖 𝛼=1 > 𝜋𝑖 𝛼=0. GED𝛼=0 > GED𝛼=1. (3.12). The results indicate the following. Because when the foreign investor invest the firm will decrease the abatement cost. On the other hand, complete foreign ownership leads to lower environmental tax rates. Furthermore, complete foreign ownership leads to an increase in the output of firm 0 and the output of firm i. Hence, complete foreign ownership increases consumer surplus, resulting in a positive impact on the domestic welfare. Therefore, a decrease in environmental tax rates due to foreign ownership decreases environmental damage, thereby creating a positive impact on social welfare. However, we can know that foreign ownership will decrease the environmental tax and the total taxes, which has a negative impact on social welfare. We can summarize these results in the following proposition. Proposition 3.2 Consider the situation of environmental taxes in mixed oligopoly. Then, foreign ownership restriction leads to low environmental tax rates and a decrease in total taxes and environmental damage.. 3.2.1 Welfare Comparison In this section, we compare welfare and discuss the implications of the results. Following Propositions 3.2 . (Superscript F represents the equilibrium of case (i)). SW F 𝛼=0 > SW F 𝛼=1. (3.13). The reasoning behind this result is as follows. Following Lemma 3.1, the effect of the total taxes is the only term which creating a negative impact on social welfare. When the foreign investors invest the private firms bring two effects on social welfare. 19.

(27) Firstly, it is direct affect the environmental tax rate, because the foreign ownership are more care about environment, when the foreign investors invest the firm can decrease the cost of abatement. Secondly, it indirect increases the quantity and the profit of the domestic public firm through decrease the environmental tax rate. And follow (3.12), we obtain that the total taxes can decrease even if the total quantity increased. Base on that, intuitively, we can infer that the environmental tax rate are decreasing by a wide marginal. We can summarize these results: when the private firms completely owned by the foreign investor, the environmental tax rate will decrease by a wide marginal, and cause the negative-effect exceeds the positive-effect in social welfare. The discussion above is summarized in the following proposition. Proposition 3.3 Consider the situation of environmental taxes in mixed oligopoly. When the private firms completely owned by the foreign investors that will creating a negative impact on the social welfare. Here we indicates the robust of the result obtained in Ohori (2011). 3.3 Case (ii) In this section, we consider the case where the private firms partially owned by the foreign investors. There are a bit of change on the base model. We assume that in a mixed oligopolistic market where one domestic public firm (firm 0), 𝑚 private firms. (firm i) owned by the foreign investors and 𝑛 − 𝑚 private firms (firm i) are owned by domestic investor only.. invest by foreign investors. 1…. owned by domestic investor. …….𝐦 20. …….𝐧.

(28) The inverse-demand function is linear 𝑝 = 𝐴 − 𝑞0 − ∑𝑚 𝑖=1 𝑞𝑖 − � 𝑄 = 𝑞0 + ∑𝑚 𝑖=1 𝑞𝑖 + �. 𝑛−𝑚 𝑗=𝑚. 𝑛−𝑚 𝑗=𝑚. 𝑞𝑗 , and. 𝑞𝑗 denotes the total output. And the production of this. good in both public and private firms leads to pollution, 𝑒0 = 𝑞0 − 𝑎0 ,. 𝑒𝑖 = 𝑞𝑖 −. 𝑎𝑖 and 𝑒𝑗 = 𝑞𝑗 − 𝑎𝑗 . We assume that the cost function of firm i is given by 1. 1. 𝑐ℎ = 2 𝑞ℎ 2 + 2 𝑘ℎ 𝑎ℎ 2 , where 𝑘ℎ denotes the efficiency parameter of the variable. costs of production. Suppose that the investment by foreign investors into firm i lead to more efficient abatement technology relative to firm i. Then, we assume 𝑘0 = 1, 𝑘𝑖 = 1 − 𝛼 and 𝑘𝑗 = 1, where 𝛼 ∈ (0,1) represents the share of foreign capital ownership in firm i.. In the first stage, the government chooses a tax rate to maximize SW. In the second stage, after observing t, we follow the Wang and Wang (2009), the objective function of the public firm is CS and its own profit 𝐺 = CS + 𝜋0 , and the private firms are. maximizing its own profit. In the market stage, the public firm maximizes 𝐺 = CS + 𝜕𝜕. 𝜕𝜕. 𝜋0 , 𝜕𝑞 = 0,. 𝜕𝑎0. 𝑗. 𝜕𝑎𝑗. 𝜕𝜋. 0. 0, , 𝜕𝑞𝑗 = 0,. 𝜕𝜋𝑗. 𝜕𝜋. = 0 ,and the private firms maximize its own profit, 𝜕𝑞𝑖 = 0, 𝑖. =0. 𝜕𝜋𝑖 𝜕𝑎𝑖. =. From the first-order conditions, we have (Superscript P. represents the equilibrium of case (ii)). 𝑞0 P =. 𝐴−𝑡. 𝑎0 P = 𝑡. 2. (4+𝑛)(𝐴−𝑡). 𝑞𝑖 P = 2(2+𝑚)(2(2+𝑛)−𝑚) 𝑡. 𝑎𝑖 P = 1−𝛼. 𝐴−𝑡. 𝑞𝑗 P = 2(2+𝑛)−𝑚 𝑎𝑗 P = 𝑡. (3.14) 21.

(29) And differentiating (3.14) with respect to 𝛼, we obtain 𝜕𝑞0 P 𝜕𝜕. 𝜕𝑎0 P 𝜕𝜕. 𝜕𝑞i P 𝜕𝜕. 𝜕𝑎i P 𝜕𝜕. 𝜕𝑞j P 𝜕𝜕. 𝜕𝑎j P 𝜕𝜕. =0. =0. =0. 𝑡. = (−1+𝛼)2 > 0. =0. =0. (3.15). The reasoning behind these results is because of our assumption, foreign ownership increases the abatement effort of firm i. In the first stage, the government sets environmental tax to maximize the social welfare. Differentiating SW with respect to t, we obtain the optimal environmental tax 𝛤. 𝑡𝑃 = 𝛥. (3.16). 𝛤 = �𝐴(−1 + 𝛼) �−16(1 + 𝑛)�12 + 𝑛(17 + 4𝑛)�(−1 + 𝛼) + 6𝑚5𝛼 + 𝑚4(19 + 6𝑛 −. 7(5 + 4𝑛)𝛼) + 𝑚�96 + 𝑛�360 + 𝑛(337 + 72𝑛)� + 80𝛼 − 2𝑛�80 + 𝑛(137 + 36𝑛)�𝛼 + (−12 + 𝑛)(4 + 𝑛)𝛼 2 � + 2𝑚2 (−58 + 𝑛(−3 + 2𝑛)(18 + 5𝑛) + 98𝛼 + 2𝑛(66 +. (7 − 5𝑛)𝑛)𝛼 + (−2 + 𝑛)(4 + 𝑛)𝛼 2 ) + 2𝑚3 �−𝑛(40 + 11𝑛) + 7𝑛(5 + 3𝑛)𝛼 − (4 + 𝑛)𝛼 2 − 8(2 + 𝛼)��. 𝛥 = (−16(1 + 𝑛)(60 + 𝑛(81 + 4𝑛(8 + 𝑛)))(−1 + 𝛼)2 − 4𝑚6𝛼 2 + 𝑚(−1 + 𝛼)(480 +. 𝑛(1512 + 𝑛(1473 + 16𝑛(33 + 4𝑛))) + 848𝛼 − 2𝑛(−208 + 𝑛(289 + 8𝑛(25 + 4𝑛)))𝛼 + (−12 + 𝑛)(4 + 𝑛)𝛼 2 ) + 2𝑚3 (48 + 2𝑛(55 + 𝑛(27 + 4𝑛)) + 52𝛼 − 𝑛(161 + 32𝑛(5 + 𝑛))𝛼 + 2(−80 + 𝑛(−22 + 𝑛(37 + 12𝑛)))𝛼 2 − (4 + 𝑛)𝛼 3 ) + 4𝑚5𝛼(−7 + 11𝛼 +. 𝑛(−2 + 6𝛼)) + 𝑚4 (−39 − 87(−2 + 𝛼)𝛼 − 4𝑛(−1 + 𝛼)(−6 + 41𝛼) + 𝑛2 (−4 + 40𝛼 −. 52𝛼 2 )) + 2𝑚2 (162 − 8𝑛4 (−1 + 𝛼)2 + 4𝑛3 (−1 + 𝛼)(11 + 5𝛼) − 2𝛼(326 + 𝛼(−185 + 22.

(30) 4𝛼)) + 𝑛2 (−27 + 𝛼(−337 + 𝛼(331 + 𝛼))) + 2𝑛(83 + 𝛼(−501 + 𝛼(353 + 𝛼))))). Differentiating (3.16) with respect to α and s, we obtain 𝜕𝜕. 𝜕𝜕. <0 ,. 𝜕𝜕. 𝜕𝜕. <0. The equilibrium environmental tax rate decreases as the share of foreign capital ownership in firm i. Because when the share of foreign capital ownership in firm i increase, that is mean the total pollution decrease more. By comparing the equilibrium values of α = 0 and α = 1, we obtain the following. results.. 𝑡 𝛼=0 > 𝑡 𝛼=1. 𝑞0 𝛼=1 > 𝑞0 𝛼=0 > 𝑞𝑖 𝛼=1 > 𝑞𝑖 𝛼=0. 𝑎𝑖 𝛼=1 > 𝑎𝑖 𝛼=0 > 𝑎0 𝛼=𝑜 > 𝑎0 𝛼=1 𝑄 𝛼=1 > 𝑄 𝛼=0. 𝑇 𝛼=0 > 𝑇 𝛼=1. 𝜋0 𝛼=1 > 𝜋0 𝛼=0 𝜋𝑖 𝛼=1 > 𝜋𝑖 𝛼=0. GED𝛼=0 > GED𝛼=1. (3.17). The results indicate the following as same as we proof previously. But there are some differences in the social comparison.. 3.3.1 Welfare Comparison In this section, we compare welfare and discuss the implications of the results. When the private firm completely owned by foreign investors, we found that foreign ownership will decrease the social welfare even if the foreign ownership are care about environment, and we indicates the robust of the result obtained in Ohori (2011) in case (i). But in case (ii), we found that when the private firms are partial owned by 23.

(31) foreign investors, the result is ambiguous. Here, we simplify the optimal environmental tax (3.16), we assume 𝐴 = 1 and. 𝑚 = 𝜇 𝑛, where 𝜇 is a proportion of the amount of the private firm which invest by foreign investor. We obtain (Superscript S represents the simplification of the equilibrium) SW S 𝛼=0. > <. SW S 𝛼=1. (3.18). We found that the proportion of the amount of the private firm which invest by foreign investor 𝜇 is the key point whether the foreign ownership improvement the social welfare and the environment or not.. Now, we compare the welfare differences between SW 𝛼=1 𝑎𝑎𝑎 SW 𝛼=0 , and. assume 𝐴 = 1, 𝑛 = 100. We obtain that SW S 𝛼=1 − SW S 𝛼=0 =. 𝛨. (3.19). 𝛸. 𝛨 = 5537674056 − 25𝜇(25𝜇(625𝜇(2𝜇(100𝜇(50𝜇(25𝜇(30250𝜇 + 2067207) − 272149903) + 21896489573) − 1038223749847) − 101148922981) − 906085947852) − 102576956329) 𝛸=. 40(51 − 25𝜇)2 (50𝜇 + 1)2 (25𝜇(5𝜇(100𝜇(1060975𝜇 − 4275524) + 422126619) +. 86786021) + 21857208). from (3.19), we obtain that when 𝜇 = 0.9950403960067675, there is no differences between SW 𝛼=1 𝑎𝑎𝑎 SW 𝛼=0 .. When 𝜇 > 0.9950403960067675, it will leads to SW 𝛼=1 < SW 𝛼=0 , this result is. the same case (i) which is robust the result of Ohori (2011). But when 𝜇 <. 0.9950403960067675 , we will get a completely different result. When 𝜇 < 0.9950403960067675, it will leads to SW 𝛼=1 > SW 𝛼=0 . On the other hand, the. foreign ownership improve the social welfare and the environment simultaneously. 24.

(32) 𝜇. The reasoning behind this result is as follows. In case (i), the private completely owned by foreign investors, it will leads to decrease the emission tax rate by a wide marginal. It will cause the negative-effect exceed the positive-effect even if foreign ownership can improve the environment. But in case (ii), the private firms only partially owned by the foreign investors, it will transfer the negative-effect and enhance the positive-effect. The discussion above is summarized in the following proposition. Proposition 3.4 Consider the situation of emission taxes in mixed oligopoly. When the proportion. which. the. private. firm. owned. by. foreign. investors. 𝜇 ,. 𝜇 < 0.9950403960067675, the foreign ownership can improve both the social welfare and the environment... 3.4 Conclusion The study investigates the effects of foreign ownership of a domestic firm on the establishment of environmental policy under a mixed oligopolistic market. With regard to the ownership of the private firms, we analyze two cases: (i) the private firms completely owned by the foreign investors and (ii) the private firms partially 25.

(33) owned by the foreign investors. We find that when the private firm is completely owned by the foreign investor, it will decrease social welfare under environmental policy which indicates the robust of the result obtained in Ohori (2011). However, when the private firm partially owned by the foreign investor, it will improve the environment and social welfare.. 26.

(34) CHAPTER FOUR: Union, Environment-Concerned Wage Bargaining and Social Welfare in Mixed Oligopoly In this paper, we explored the implications of the environment-concerned union bargaining and firm heterogeneity in mixed oligopoly. The results obtained are the following. Firstly, regardless the type of union bargaining, the wage will increase when the marginal environment damage increases. Secondly, when an emission tax is imposed, centralized wage will be lower than the decentralized wages. Lastly, under the environment-concerned union bargaining, when an emission tax is imposed and the productivity spread between firms is narrower, the social welfare under decentralized wages will be less than the social welfare under centralized wages.. 4.1 Base Mode Consider a Cournot duopoly with the linear inverse demand function given as 𝑃 = 𝐴 − 𝑄, where 𝑃 is the market price, 𝑄 = 𝑞0 + ∑𝑛𝑖=1 𝑞𝑖 is the total combined output of two firms. The consumer surplus is defined as CS =. 𝑄2 2. . Assuming that the. cost structures of both firms are 𝑐𝑗 = 𝑤𝑗 𝑙𝑗 + 𝑓, j = 0, 1, … , n, where f is the fixed cost, 𝑙𝑗 is the amount of labors hired by each firm, and 𝑤𝑗 are the wages bargained. between each union and its corresponding firm. The pollution 𝑒𝑗 = 𝑏𝑞𝑗 , 𝑗 = 0,1, … . . , 𝑛, where b is a parameter measure the marginal environment damage,. 𝑏 ∈ (0,1). Environmental damage is measured by the quadratic form GED = 1 2. (𝑒0 + ∑𝑛𝑖=1 𝑒𝑖 )2 , which is the government measure. Each firm has to pay an. environmental tax t per unit of pollutant, indicating that 𝑇 = 𝑡(𝑒0 + ∑𝑛𝑖=1 𝑒𝑖 ) is the total taxes collected by the government.. The profit functions of the public firm and the private firm are defined as follows 27.

(35) describing that the profit is the revenue less production cost, the fixed cost and the emission tax. 𝜋0 = 𝑃𝑞0 − 𝑤0 𝑙0 − 𝑓 − 𝑡𝑒0 𝜋𝑖 = 𝑃𝑞𝑖 − 𝑤𝑖 𝑙𝑖 − 𝑓 − 𝑡𝑒𝑖. It is assumed that 𝑓 = 0. To explicitly depict the difference of productivity but. under the premise of homogeneous labors, it is assumed that the relations between the labor input and the output of a less efficient public firm and an efficient private firm are 𝑞0 = 𝑠 𝑙0 and 𝑞𝑖 = (1 + 𝑠) 𝑙𝑖 , respectively. In these input-output relations,. 0 < 𝑠 < 1 brings out the productivity differences between firms, which results in that the less efficient public firm needs to hire more employers to achieve the same level of output that can be produced with fewer workers by the efficient private firm. Each firm has its own union and the unions operate independently to negotiate with _. its corresponding firm to decide the wage level. The reservation wage is set to be 𝑤 . The utility functions of the unions are as (4.1). _. Max 𝑢𝑗 = [𝑤𝑗 − 𝑤 ]𝜃 (1 + 𝑏)𝑞𝑗 𝑤𝑗. (4.1). In the utility functions, θ is the importance a union attaches to the wage. Here we explore that the union will consider the environment damage when they decide the wage. The wage is relative to the emission. Booth (1995),Haucap and Wey _. (2004),Leahy and Montagna (2000),and Lommerud et al. (2003), 𝜃 = 1 and 𝑤 = 0 are assigned to exclude unnecessary influences from the analyses. The social welfare comprises consumer surplus, profit of firms, union utility, tax revenue and the emissions: SW = CS + 𝜋0 + ∑𝑛𝑖=1 𝜋𝑖 + 𝑢0 + ∑𝑛𝑖=1 𝑢𝑖 + 𝑇 − GED. This function includes the union rents as usual in literature (see, for example, Mezzetti and Dinopoulos, 1991: Ulph, 1996). Union rents are included as that part of 28.

(36) the producer surplus which is absorbed by the unions. A three-stage game is built to explore the environmental policies under the consideration of unions and wage bargaining. In the first stage, the government sets the optimal tax rate from the perspective of social welfare maximization. The second stage decides the optimal wages through the bargaining between the firms and the unions. The final stage deals with the quantity competition to find out the output. With the Subgame Perfect Equilibrium (SPE), the backward induction is adopted to solve the game.. 4.2 The firms choose the output in mixed oligopoly In the third stage, we follow the Wang and Wang (2009), the objective function of the public firm is CS and its own profit 𝐺 = CS + 𝜋0 , and the private firms are. maximizing its own profit. We have the following first-order conditions： 𝜕𝜕. 𝜕𝑞0. 𝜕𝜋𝑖 𝜕𝑞𝑖. = 𝐴 − bt − 𝑞0 −. 𝑤0 s. =0. (4.2) 𝑤. 𝑖 = 𝐴 − 𝑞0 − 𝑏𝑏 − (𝑛 + 1)𝑞𝑖 − (1+s) =0. (4.3). Solving the first-order conditions (4.2) and (4.3) we obtain that 𝑞0 = 𝐴 − 𝑏𝑏 − 𝑞𝑖 =. 𝑤0. (4.4). 𝑠. 𝑤0 +𝑠𝑤0 −𝑠𝑤𝑖. (4.5). (1+𝑛)(𝑠+𝑠2 ). 4.2.1 The unions choose the decentralized wage In the second stage, the wage setting is decentralized; each wage is set to maximize the union of the corresponding firm. Using (4.1) the union objective functions are 𝑢0 = 𝑤0 (1 + 𝑏)(𝐴 − 𝑏𝑏 −. 𝑤0 𝑠. ) 29.

(37) 𝑤 +𝑠𝑤 −𝑠𝑤. 0 0 𝑖 𝑢𝑖 = 𝑤𝑖 (1 + 𝑏) � (1+𝑛)(𝑠+𝑠 � 2). (4.6). The first-order conditions are the following, which lead to 1. (4.7). 1. (4.8). 𝑤0 = 2 𝑠(𝐴 − 𝑏𝑏). 𝑤𝑖 = 4 (1 + 𝑠)(𝐴 − 𝑏𝑏). From (4.7) and (4.8) we see that 𝑤0 < 𝑤𝑖 , the bargained wages will be influenced. by the labor productivities and the efficient firm pays higher wages than the less-efficient firm.. 4.2.2 The government decides the emission tax R. 𝑆𝑆 = 32(1+𝑛)2. 𝑅 = (𝐴2 (4 − 𝑏2 (2 + 3𝑛)2 + 8𝑠 + 2𝑏(1 + 𝑛)(𝑛 + 4𝑠 + 5𝑛𝑛) + 𝑛(12 + 7𝑛 + 2(9 +. 5𝑛)𝑠)) + 2𝐴𝐴(4 + 8𝑛 + 5𝑛2 + 𝑏2 (2 + 3𝑛)2 − 2(1 + 𝑛)(4 + 5𝑛)𝑠 − 2𝑏(1 + 𝑛)(𝑛 + 4𝑠 + 5𝑛𝑛))𝑡 + 𝑏 2 (−12 − 𝑏2 (2 + 3𝑛)2 + 8𝑠 + 2𝑏(1 + 𝑛)(𝑛 + 4𝑠 + 5𝑛𝑛) + 𝑛(−28 − 17𝑛 + 2(9 + 5𝑛)𝑠))𝑡 2 ). Then rate is. 𝜕SW 𝜕𝜕. = 0 , from the first-order conditions, we have the optimal emission tax. 𝐴(4+8𝑛+5𝑛2 +𝑏2 (2+3𝑛)2 −2(1+𝑛)(4+5𝑛)𝑠−2𝑏(1+𝑛)(𝑛+4𝑠+5𝑛𝑛)). 𝑡 𝑀 = 𝑏(12+28𝑛+17𝑛2 +𝑏2 (2+3𝑛)2 −2(1+𝑛)(4+5𝑛)𝑠−2𝑏(1+𝑛)(𝑛+4𝑠+5𝑛𝑛)). Differentiating (4.9) with respect to 𝜕𝜕. (4.9). , we obtain. Z. = (𝑏2 (12−2𝑏𝑏(1+𝑛)+𝑏2(2+3𝑛)2 +𝑛(28+17𝑛)−2(1+𝑏)(1+𝑛)(4+5𝑛)𝑠)2 ) > 0 𝜕𝜕. (4.10). 𝑍 = (𝐴(−𝑏 4 (2 + 3𝑛)4 + 4𝑏3 (1 + 𝑛)(2 + 3𝑛)2 (𝑛 + 4𝑠 + 5𝑛𝑛) + 2𝑏2 (𝑛(8 + 𝑛(26 +. 𝑛(26 + 7𝑛))) + 2(1 + 𝑛)(4 + 5𝑛)(4 + 𝑛(10 + 7𝑛))𝑠 − 2(1 + 𝑛)2 (4 + 5𝑛)2 𝑠 2 ) −. 4𝑏(1 + 𝑛)(𝑛 + 4𝑠 + 5𝑛𝑛)(−4 + 8𝑠 + 𝑛(−8 − 5𝑛 + 2(9 + 5𝑛)𝑠)) − (−12 + 8𝑠 +. 𝑛(−28 − 17𝑛 + 2(9 + 5𝑛)𝑠))(−4 + 8𝑠 + 𝑛(−8 − 5𝑛 + 2(9 + 5𝑛)𝑠)))). Lemma 4.1 Following (4.10), the emission tax impose will increase when the 30.

(38) marginal environment damage increase. Lemma 4.2 The corresponding equilibrium outcomes are the followings: 2𝐴(1+𝑛)(2+3𝑛). (4.11). 𝐴(2+3𝑛). (4.12). 2𝐴(1+𝑛)(2+3𝑛)𝑠. (4.13). 𝐴(1+𝑛)(2+3𝑛)(1+𝑠). (4.14). 4𝐴2 (1+𝑏)(1+𝑛)2 (2+3𝑛)2 𝑠. (4.15). 𝐴2 (1+𝑏)(1+𝑛)(2+3𝑛)2 (1+𝑠). (4.16). 𝑞0𝑀 = 12+28𝑛+17𝑛2 +𝑏2 (2+3𝑛)2 −2(1+𝑛)(4+5𝑛)𝑠−2𝑏(1+𝑛)(𝑛+4𝑠+5𝑛𝑛) 𝑞𝑖𝑀 = 12+28𝑛+17𝑛2 +𝑏2 (2+3𝑛)2 −2(1+𝑛)(4+5𝑛)𝑠−2𝑏(1+𝑛)(𝑛+4𝑠+5𝑛𝑛). 𝑤0𝑀 = − −12−𝑏2 (2+3𝑛)2 +8𝑠+2𝑏(1+𝑛)(𝑛+4𝑠+5𝑛𝑛)+𝑛(−28−17𝑛+2(9+5𝑛)𝑠) 𝑤𝑖𝑀 = − −12−𝑏2 (2+3𝑛)2 +8𝑠+2𝑏(1+𝑛)(𝑛+4𝑠+5𝑛𝑛)+𝑛(−28−17𝑛+2(9+5𝑛)𝑠) 𝑢0 = (12+28𝑛+17𝑛2 +𝑏2 (2+3𝑛)2 −2(1+𝑛)(4+5𝑛)𝑠−2𝑏(1+𝑛)(𝑛+4𝑠+5𝑛𝑛))2 𝑢𝑖 = (12+28𝑛+17𝑛2 +𝑏2 (2+3𝑛)2 −2(1+𝑛)(4+5𝑛)𝑠−2𝑏(1+𝑛)(𝑛+4𝑠+5𝑛𝑛))2. 𝐴2 (2+3𝑛)2 (4+8𝑛+5𝑛2 +𝑏2 (2+3𝑛)2 −2(1+𝑛)(4+5𝑛)𝑠−2𝑏(1+𝑛)(𝑛+4𝑠+5𝑛𝑛)). 𝑇=. (12+28𝑛+17𝑛2 +𝑏2 (2+3𝑛)2 −2(1+𝑛)(4+5𝑛)𝑠−2𝑏(1+𝑛)(𝑛+4𝑠+5𝑛𝑛))2. (4.17). 𝐴2 𝑏2 (2+3𝑛)4. (4.18). 𝐴2 (2+3𝑛)2. (4.19). 𝐺𝐺𝐺 = 2(12+28𝑛+17𝑛2 +𝑏2 (2+3𝑛)2 −2(1+𝑛)(4+5𝑛)𝑠−2𝑏(1+𝑛)(𝑛+4𝑠+5𝑛𝑛))2 𝑆𝑆 𝑀 = 2(12+28𝑛+17𝑛2 +𝑏2 (2+3𝑛)2 −2(1+𝑛)(4+5𝑛)𝑠−2𝑏(1+𝑛)(𝑛+4𝑠+5𝑛𝑛)) Differentiating (4.11)~(4.19) with respect to 𝑏 , we obtain 𝜕𝑞0 𝜕𝜕. 𝜕𝑞𝑖 𝜕𝜕. 𝜕𝑤0. 4𝐴(1+𝑛)(2+3𝑛)(𝑏(2+3𝑛)2 −(1+𝑛)(𝑛+4𝑠+5𝑛𝑛)). = − (12+28𝑛+17𝑛2 +𝑏2 (2+3𝑛)2 −2(1+𝑛)(4+5𝑛)𝑠−2𝑏(1+𝑛)(𝑛+4𝑠+5𝑛𝑛))2 > 0 2𝐴(2+3𝑛)(𝑏(2+3𝑛)2 −(1+𝑛)(𝑛+4𝑠+5𝑛𝑛)). = − (12+28𝑛+17𝑛2 +𝑏2(2+3𝑛)2 −2(1+𝑛)(4+5𝑛)𝑠−2𝑏(1+𝑛)(𝑛+4𝑠+5𝑛𝑛))2 > 0. 𝜕𝜕. 𝜕𝑤𝑖 𝜕𝜕. 4𝐴(1+𝑛)(2+3𝑛)𝑠(−𝑏(2+3𝑛)2 +(1+𝑛)(𝑛+4𝑠+5𝑛𝑛)). = (12+28𝑛+17𝑛2 +𝑏2 (2+3𝑛)2 −2(1+𝑛)(4+5𝑛)𝑠−2𝑏(1+𝑛)(𝑛+4𝑠+5𝑛𝑛))2 > 0 2𝐴(1+𝑛)(2+3𝑛)(1+𝑠)(−𝑏(2+3𝑛)2 +(1+𝑛)(𝑛+4𝑠+5𝑛𝑛)). = (12+28𝑛+17𝑛2 +𝑏2(2+3𝑛)2 −2(1+𝑛)(4+5𝑛)𝑠−2𝑏(1+𝑛)(𝑛+4𝑠+5𝑛𝑛))2 > 0. 𝜕𝜕𝜕𝜕 𝜕𝜕. 𝜕𝜕𝜕 𝜕𝜕. 𝐴2 𝑏(2+3𝑛)4 (−12+𝑏 2 (2+3𝑛)2 +8𝑠+𝑛(−28−17𝑛+2(9+5𝑛)𝑠)). = − (12+28𝑛+17𝑛2 +𝑏2(2+3𝑛)2 −2(1+𝑛)(4+5𝑛)𝑠−2𝑏(1+𝑛)(𝑛+4𝑠+5𝑛𝑛))3 > 0 𝐴2 (2+3𝑛)2 (𝑏(2+3𝑛)2 −(1+𝑛)(𝑛+4𝑠+5𝑛𝑛)). = − (12+28𝑛+17𝑛2 +𝑏2(2+3𝑛)2 −2(1+𝑛)(4+5𝑛)𝑠−2𝑏(1+𝑛)(𝑛+4𝑠+5𝑛𝑛))2 > 0. (4.20). Proposition 4.1 From (4.20), we obtain that the quantity, the setting wage, 31.

(39) environment damage and the welfare will increase as the marginal environment damage increase. The result is coming from the following reasoning. From Lemma 4.1, we know that the emission tax impose will increase when the marginal environment damage increase. But when the marginal environmental damage increase that is means the total environmental damage will increase which is the negative impact on the social welfare. But from (4.20), we obtain that the welfare will increase as the marginal environment damage increase. So we infer that the environment-concerned of union bargaining will cause the firm won`t care of the environmental damage and increase their wage by increasing the quantity.. 4.3 The pure oligopoly and emission tax In the first stage, the government sets the optimal tax rate from the perspective of social welfare maximization. The second stage decides the optimal wages through the bargaining between the firms and the unions. The final stage deals with the quantity competition to find out the output. In the market stage, the public firm maximizes its own profit, 𝜕𝜋. 𝜕𝜋0 𝜕𝑞0. = 0 ,and the. private firms maximize its own profit, 𝜕𝑞𝑖 = 0. From the first-order conditions, we 𝑖. have. 𝑞0𝑃 = 𝑞𝑖𝑃 =. 𝑠(1+𝑠)(𝐴−𝑏𝑏)−(1+𝑛+𝑠)𝑤. (4.21). 𝑠(1+𝑠)(𝐴−𝑏𝑏)+𝑤−𝑠𝑠. (4.22). (2+𝑛)𝑠(1+𝑠). (2+𝑛)𝑠(1+𝑠). In the second stage, the wage setting is centralized and we consider that there is an industry-wide union. Unions set wage simultaneously taking into account the equilibrium of the third stage. Union objective function is now specified as 32.

(40) Max u = 𝑤(1 + 𝑏)(𝑞0 + ∑𝑛𝑖=1 𝑞𝑖 ). (4.23). w. each wage is set to maximize the union of the corresponding firm 𝑢 = 𝑤(1 + 𝑏) �. 𝑠(1+𝑠)(𝐴−𝑏𝑏)−(1+𝑛+𝑠)𝑤 (2+𝑛)𝑠(1+𝑠). 𝑠(1+𝑠)(𝐴−𝑏𝑏)+𝑤−𝑠𝑠. +𝑛�. (2+𝑛)𝑠(1+𝑠). The first-order conditions are the following, which lead to 𝑤𝑃 =. ��. (4.24). (1+𝑛)𝑠(1+𝑠)(𝐴−𝑏𝑏). (4.25). 2(1+𝑠+𝑛𝑛). Then the government decides the emission tax,. 𝜕SW. conditions, we have the optimal emission tax rate is. 𝜕𝜕. = 0 , from the first-order. 𝐵. 𝑡𝑃 = A. (4.26). 𝐵 = −(𝐴(1 − 7𝑛 − 8𝑛2 − 2𝑛3 − 2(1 + 𝑛)3 𝑠 − (1 + 𝑛)2 (7 + 𝑛(7 + 2𝑛))𝑠 2 − 2(1 +. 𝑛)3 (2 + 𝑛)𝑠 3 − 2𝑏(1 + 𝑛)2 (2 + 𝑛)𝑠(1 + 𝑠)(1 + 𝑠 + 𝑛𝑛) + 𝑏 2 (1 + 𝑛)(1 + 𝑠 + 𝑛𝑛)2 )) 𝐴 = (𝑏(−5 + 5𝑛 + 8𝑛2 + 2𝑛3 + 2(1 + 𝑛)(−3 + 𝑛2 )𝑠 + (1 + 𝑛)3 (3 + 2𝑛)𝑠 2 +. 2(1 + 𝑛)3 (2 + 𝑛)𝑠 3 + 2𝑏(1 + 𝑛)2 (2 + 𝑛)𝑠(1 + 𝑠)(1 + 𝑠 + 𝑛𝑛) − 𝑏 2 (1 + 𝑛)(1 + 𝑠 +. 𝑛𝑛)2 )). Differentiating the equilibrium with respect to b , we obtain 𝜕𝑞0 𝜕𝜕. 𝜕𝑞𝑖 𝜕𝜕. 𝜕𝑤0. >0. >0. 𝜕𝜕. 𝜕𝑤𝑖 𝜕𝜕. >0. >0. 𝜕𝜕𝜕𝜕 𝜕𝜕. 𝜕𝜕𝜕 𝜕𝜕. >0. >0. (4.27). 4.4 Comparisons of the two cases considered above In this section we are going to compare the results obtained in the section 3 and 4. 33.

(41) If the independent union chooses the wage in mixed oligopoly, from (4.13) and (4.14) we have 2𝐴(1+𝑛)(2+3𝑛)(−1+µ). 𝑤0𝑀 = − (2+3𝑛)2 +𝑏2(2+3𝑛)2 −2𝑏(1+𝑛)(4+5𝑛) 𝐴(1+𝑛)(2+3𝑛)(1+µ). 𝑤𝑖𝑀 = (2+3𝑛)2 +𝑏2 (2+3𝑛)2 −2𝑏(1+𝑛)(4+5𝑛). (4.28). Under centralized union in pure oligopoly, from (4.25), we have 𝑤𝑃 =. (𝐴−𝑏𝑏)(−1+𝑛(−1+µ)−µ)(−1+µ2 ). (4.29). 2((1+µ)2 +𝑛(1+µ(−2+5µ))). Comparing (4.28) and (4.29), the following results are 𝑤𝑖𝑀 > 𝑤0𝑀 > 𝑤 𝑃. (4.30). When the unions are care of the environment, centralized wage in pure oligopoly will be lower than the decentralized wages in mixed oligopoly. From (4.9) and (4.26), we compare emission tax under the unions are care of the environment. 𝑡 𝑃 < 𝑡𝑀 (4.31) When the unions are care of the environment, emission tax in pure oligopoly will be lower than the emission tax in mixed oligopoly. Now, we compare the welfare under the unions are care of the environment. When µ < µ �⃑ 0. 𝑺𝑺𝑴 < 𝑆𝑆 𝑷. �µ⃑. 1. 𝑺𝑺𝑷 < 𝑆𝑆 𝑴. µ. When the unions are care of the environment and productivity spread is narrower, the welfare in pure oligopoly will be higher than the welfare in mixed oligopoly; if productivity spread is wider, the welfare in pure oligopoly will be lower than the welfare in mixed oligopoly. 34.

(42) Proposition 4.2 When an emission tax is imposed and the productivity spread between firms is wider, the social welfare under centralized wage in pure oligopoly will be less than the wage of the public firm under decentralized wages in mixed oligopoly.. 4.5. Conclusions In this paper, we explored the implications of the environment-concerned union bargaining and firm heterogeneity in mixed oligopoly. The results obtained are the following. Firstly, regardless the type of union bargaining, the wage will increase when the marginal environment damage increases. Secondly, when an emission tax is imposed, centralized wage will be lower than the decentralized wages. Lastly, under the environment-concerned union bargaining, when an emission tax is imposed and the productivity spread between firms is narrower, the social welfare under decentralized wages will be less than the social welfare under centralized wages.. 35.

(43) CHAPTER FIVE: CONCLUSIONS Recent years, public are being to concern about the environmental issues. Developing countries paid more and more attention on environment policy. In pace with the globalization of the world economy, we consider market-opening policies: consumers` awareness, foreign ownership and union with environmental issues. In chapter two, we examine the impact of an emission tax in a mixed duopolistic model characterized by consumers’ environmental awareness and produce differentiation. The purpose is to examine whether privatization improves the environment and social welfare or not in a mixed duopolistic model. We show that in mixed duopoly with emission tax and consumers` environmental awareness, the privatization will improve the environment and the welfare in a mixed duopolistic model. In chapter three, we investigate the effects of foreign ownership of a domestic firm on the establishment of environmental policy under a mixed oligopolistic market. With regard to the ownership of the private firms, we analyze two cases: (i) the private firms completely owned by the foreign investors and (ii) the private firms partially owned by the foreign investors. We find that when the private firm is completely owned by the foreign investor, it will decrease social welfare under environmental policy which indicates the robust of the result obtained in Ohori (2011). However, when the private firm partially owned by the foreign investor, it will improve the environment and social welfare. In chapter four, we explored the implications of the environment-concerned union bargaining and firm heterogeneity in mixed oligopoly. The results obtained are the following. Firstly, regardless the type of union bargaining, the wage will increase when the marginal environment damage increases. Secondly, when an emission tax is 36.

(44) imposed, centralized wage will be lower than the decentralized wages. Lastly, under the environment-concerned union bargaining, when an emission tax is imposed and the productivity spread between firms is narrower, the social welfare under decentralized wages will be less than the social welfare under centralized wages.. 37.

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