SMU SOE Online Seminar (Nov 18, 2021, 9.00am-10.30am): Colluding Against Environmental Regulation

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ABSTRACT We study collusion among firms under imperfectly monitored environmental regulation. We develop a model in which firms increase variable profits by shading pollution and reduce expected noncompliance penalties by shading jointly. We apply our model to a case with three German automakers colluding to reduce the size of diesel exhaust fluid (DEF) tanks, an emission control technology used to comply with air pollution standards. To estimate our model, we use data from the European automobile industry from 2007 to 2018. We find that jointly choosing small DEF tanks lowers the expected noncompliance penalties by at least 188--976 million euros. Smaller DEF tanks improve buyer and producer surplus by freeing up valuable trunk space and saving production costs, but they create more pollution damages. Collusion reduces social welfare by 0.78--4.44 billion euros. Environmental policy design and antitrust play complementary roles in protecting society from collusion against regulation. Click here to view the paper. Click here to view the speaker's profile.		This seminar will be held virtually via Zoom. A confirmation email with the Zoom details will be sent to the registered email by 17 November 2021.
		PRESENTER Jing Li Massachusetts Institute of Technology
		RESEARCH FIELDS Industrial Organization Energy & Environmental Economics
		DATE: 18 November 2021 (Thursday)
		TIME: 9.00am - 10.30am