Abstract
We study collusion among firms against imperfectly monitored environmental regulation. Firms increase variable profits by violating regulation and reduce expected noncompliance penal-ties by violating jointly. We consider a case of three German automakers colluding to reduce the effectiveness of emissions control technology. By estimating a structural model of the European automobile industry from 2007 to 2018, we find that collusion lowers expected noncompliance penalties substantially and increases buyer and producer surplus. Due to increased pollution, welfare decreases by e 1.57–5.57 billion. We show how environmental policy design and antitrust play complementary roles in preventing noncompliance.
Keywords
Collusion; regulation; pollution; automobile market; noncompliance;
JEL codes
- L4: Antitrust Issues and Policies
- L5: Regulation and Industrial Policy
- L6: Industry Studies: Manufacturing
- Q5: Environmental Economics
Reference
Jorge Ale-Chilet, Cuicui Chen, Jing Li, and Mathias Reynaert, “Colluding Against Environmental Regulation”, TSE Working Paper, n. 21-1204, April 2021, revised May 2024.
See also
Published in
TSE Working Paper, n. 21-1204, April 2021, revised May 2024