Mixed Duopoly and Environment

They show under general demand and cost conditions that in a mixed duopoly with pollution the government can (and will) implement the socially optimal outputs and abatements by a tax-subsidy scheme and keeping the public firm fully public. The scheme requires taxing outputs and subsidizing abatements at different rates, unlike a pollution tax. Their result contradicts some of the recent claims that social optimum is not implementable and privatization is necessary. They also show that when the private firm is foreign-owned, the government will adopt some privatization and will not implement the social optimum, though the social optimum is implementable. [WP-2011-005] URL: [http://www.igidr.ac.in/pdf/publication/WP-2011-005.pdf]