A COURNOT COMPETITION MODEL WITH THE UNIFORM POLLUTION TARIFF - AN APPLICATION TO NAFTA

This paper investigates the impact of a uniform pollution tariff on pr oduction, consumption and consumer welfare in the framework of the Cou rnot competition. It suggests that the uniform pollution tariff would raise the welfare of US consumers. However, it would penalize the high er-cost producer in the country where environmental regulations are mo re stringent. The policy implication is that economic integration, suc h as NAFTA, should take discriminatory pollution tariffs into consider ation.