The Porter Hypothesis and Hyperbolic Discounting

Roy Chowdhury, Prabal (2010): The Porter Hypothesis and Hyperbolic Discounting.

Abstract

We examine pollution-reducing R&D by a monopoly firm producing a dirty product. In a dynamic framework with hyperbolic discounting, we establish conditions under which the Porter hypothesis goes through, i.e. environmental regulation increases R&D, thus reducing pollution, as well as increasing firm profits. This is likely to hold whenever R&D costs are at an intermediate level, and the planning horizon of the firms is large.

• Item Type: MPRA Paper
• Language: English
• Keywords: Porter hypothesis; abatement tax; R&D; hyperbolic discounting
• Subjects: Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q50 - General; D - Microeconomics > D7 - Analysis of Collective Decision-Making > D78 - Positive Analysis of Policy Formulation and Implementation; D - Microeconomics > D4 - Market Structure, Pricing, and Design > D42 - Monopoly

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