The efficiency of the Pigouvian tax suggests that price-based regulation is the proper benchmark for efficient regulation. However, results due to Carlton and Loury (1980, 1986) question this; when harm depends on scale effects a pure Pigou tax is inefficient regulation in the long run. In this...

It seems popular to teach that a Pigouvian tax is efficient. This strongly suggests that price-based regulation is the proper benchmark for efficient regulation. However, results due to Carlton and Loury (1980, 1986) question this; when harm depends on scale effects a pure Pigou tax is...

In this paper we analyze a simple environmental tax in Edgeworth-Bertrand duopoly with soft capacity constraints and argue that the mode of strategic interaction is co-determined by taxation. Although the capacity constraint gives rise to a non-convexity it is possible to find efficient taxes....

Taxes can change product selection bias in markets where set-up or fixed costs play an important role. We demonstrate that the Pigouvian correction for externalities will introduce products in the socially optimal order but too few firms survive. Allowing for firm specific taxes we find the...