Committed and Non-committed Policy Regimes in a Sequential Mixed Hotel Duopoly
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This article is a result of the project “GreenHealth—Digital strategies in biological assets to improve well-being and promote green health” (Norte-01-0145-FEDER-000042), supported by North Portugal Regional Operational Programme (NORTE 2020), under the PORTUGAL 2020 Partnership Agreement, through the European Regional Development Fund (ERDF). We are also grateful to the Foundation for Science and Technology (FCT, Portugal) for financial support by national funds FCT/MCTES to UNIAG, under the Project number UIDB/04752/2020.
This paper highlights the effects of corporate social responsibility (CSR) on the strategic choice of pollution abatement and on the timing of the government’s commitment to the environmental tax policy, in the hotel industry. To do this, we consider a competition between one consumer-friendly hotel and one for-profit hotel, and two policy regimes (commitment and non-commitment), with two different timings of the government’s decision about environmental taxation. Hotels choose pollution abatement investments sequentially and outputs simultaneously. We show that with a high degree of consumer-friendliness, the committed environmental tax is lower than the non-committed one. We also show that although the environmental damage may be less under the non-committed policy regime, social welfare is always better under the committed policy regime. In addition, we examine the changes in the degree of CSR on the equilibrium results.
