PT  - JOURNAL ARTICLE
AU  - Endres, Alfred
AU  - Friehe, Tim
TI  - Market Power in the Eco-industry: Polluters’ Incentives under Environmental Liability Law
AID  - 10.3368/le.88.1.121
DP  - 2012 Feb 01
TA  - Land Economics
PG  - 121--138
VI  - 88
IP  - 1
4099  - http://le.uwpress.org/content/88/1/121.short
4100  - http://le.uwpress.org/content/88/1/121.full
SO  - Land Econ2012 Feb 01; 88
AB  - This paper analyzes the output and abatement choices of perfectly competitive downstream polluters who are subject to environmental liability law and procure abatement from an imperfectly competitive eco-industry. Under strict liability, polluting firms choose suboptimal abatement, but socially optimal output given abatement. Under negligence with firm-specific abatement standards, polluting firms choose suboptimal output but socially optimal abatement given output. Under negligence with industry-wide abatement standards, the output and abatement choices of most firms are socially suboptimal. Second-best considerations are offered for each case. Under strict liability (negligence), these apply to the level of liability (the behavioral standard). (JEL H23, Q58)