In response to environmental concerns, multidivisional firms running internal markets often seek to have the associated internal (or transfer) prices incorporate their social cost of pollution. We develop a theoretical rationale and framework for this phenomenon. Modeling two vertically related...

In response to environmental concerns, multidivisional firms running internal markets often seek to have the associated internal (or transfer) prices incorporate their social cost of pollution. We first investigate this phenomenon. Modeling two vertically related subsidiaries located in...

It is well-known that an efficient pollution taxation scheme should charge each source according to its specific marginal contribution to social damages. Despite significant advances in environmental assessment and data analysis, this requirement would impose technical, informational and...