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Title: Environmental Externalities in the Presence of Network Effects: Adoption of Low Emission Technologies in the Automobile Market*
Authors: Sartzetakis, Eftichios S.
Tsigaris, Panagiotis
Type: Article
Subjects: FRASCATI::Social sciences
Keywords: automobile market
environmental externalities
fuel cell technology
network effects
Issue Date: 2005
Source: Journal of Regulatory Economics
Volume: 28
Issue: 3
First Page: 309
Last Page: 326
Abstract: The paper considers a market currently dominated by a dirty technology that imposes significant environmental costs. A clean technology, with zero environmental costs, is introduced after the maturity of the dirty technology’s network. Adoption of the clean technology is not possible due to the network benefits in favour of the dirty technology. The paper considers two types of policy intervention to correct for the environmental externality. First, we find that the tax necessary to induce adoption of the clean technology is very high implying that a tax equal to the marginal environmental damage would not resolve the externality problem in many cases. Second, if tax revenues are earmarked towards subsidizing the clean technology, the tax is lower than in the previous case and can be set equal to the marginal external damage.
ISSN: 0922-680X
Other Identifiers: 10.1007/s11149-005-3961-3
Appears in Collections:Department of Economics

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