Managerial Delegation Contracts, "Green" R&D and Emissions Taxation

Joanna Poyago-Theotoky, Soo Keong Yong*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

28 Citations (Scopus)

Abstract

We introduce an explicit environmental incentive into a managerial compensation contract in the context of a Cournot duopoly with pollution externalities under an emissions tax regime. We show that, depending on the effectiveness of "green" R&D, compared to a standard sales compensation contract, the explicit environmental focused contract results in more abatement. As a consequence, the regulator sets a lower emissions tax, and social welfare is higher. Moreover, in general, firm owners earn higher profits when adopting the environmental delegation contract.

Original languageEnglish
Article number20170128
JournalB.E. Journal of Theoretical Economics
Volume19
Issue number2
DOIs
Publication statusPublished - 2019

Keywords

  • "green" R&D
  • abatement
  • cournot duopoly
  • emissions tax
  • managerial delegation

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