The effects of pollution tax

Barnett (1980), and Baumol and Oates (1988), who also considered taxation in markets which are not perfectly competitive.5

In comparison to the case of pollution tax without coordination, note that ð@sCO�i =@αÞ ¼ ð@sCO�i =@βÞ > 0. This implies that with coordination, damages caused to either port, as measured by parameters α and β, will be compensated in the pollution tax. That is the main benefit of regional cooperation/coordination. The effects of intra-port and inter-port competition on pollution tax are definite as evidenced by the following comparative statics, ð@sCO�i =@niÞ > 0 and ð@sCO�i =@njÞ > 0. The interpretation is straightforward, as there are more shipping lines competing in the markets and thus output will be larger, the coordinated pollution tax shall always increase to compensate the increased pollution level.