The Case of Monopoly and Pollution

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 IN a recent note, Endres [3] shows that monopoly is an inefficient means of pollution control in precisely the same sense in which, with a competitive model, are Pigovian t-axes on output. The existence of feasible control for some polluting activity considerably alters the sense of Buchanan's [1] original essay. In particular, we can no longer claim that a monopolist may accidentally duplicate the equilibrium achieved under full cost internalisation by profit maximising competitive firms. If full cost internalisation implies that competitive firms will adopt a pollution control technology, rather than pay a charge for environmental inputs, the resulting product price/output configuration for the industry might be accidentally achieved by the use of monopoly power. However, the monopolist would have no incentive to adopt control so that this does not carry the implication of a socially optimal use of inputs in the indust.