The effects of taxes and subsidies on environmental qualities in a differentiated duopoly

Abstract In a horizontally differentiated duopoly, green attribute (environmental quality) can be added to the products. Average quality generates positive externality entering Government’s objective function (and possibly consumers’ utility). A tax on “dirtiest” product decreases its environmental but it increases that of cleaner rival enough imply an average increase, achieving protection. The same holds for subsidy production targeted cleanest producer. generic quality-related also externality, profits greenest and lowers those dirtiest Education campaigns by Government increase quality.