FEEM working papers "Note di lavoro" series
2000 .081

A Bargaining Model of Voluntary Environmental Agreements

Authors: Paola Manzini
Series: Climate Change and Sustainable Development
Editor: Carlo Carraro
Type: Journal
JEL: Journal of Public Economics


We present an explicit model of firm-regulator negotiations in a market with several firms. We describe how the regulatory surplus is distributed between firms and regulator, and analyse the impact of various oligopoly parameters on the resulting level of environmental regulation. Our main result is that a "toughest firm principle" holds: the outcome of negotiations is essentially determined by the firm with the most aggressive attitude towards environmental control.

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