The Effect of emission permits and pigouvian taxes on market structure

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      <subfield code="a">The Effect of emission permits and pigouvian taxes on market structure</subfield>
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      <subfield code="a">Differently from Pigouvian taxes and direct regulation, tradable emission permits can decrease competition in a polluting industry under certain circumstances. Assume a potential entrant who can buy every permit. When permits are given free to current polluters, monopolization occurs if not every polluter foresees it. If foreseen, polluters want to free ride on the entrant's market power, but entry can still occur, although not with certainty. Considering a symmetric, mixed-strategy equilibrum with unconditional bids, the prbably of entry decreases as the number of polluters increases. When permits are sold initially, monopolization occurs without more requirements than polluters being financially constrained</subfield>
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