ScholarWorks@숙명여자대학교

초록

We theoretically analyze the interaction between two representative and real tanneries, denoted by A and B, that are located on the same bank of the Ganges River in Kanpur, India. Tannery A is situated upstream from tannery B. Both tanneries produce leather and leather production by tannery A also gives rise to chemical waste that adversely affects the cost incurred by tannery B in producing leather. In this setting, we perform four tasks. First, we determine the amount of chemical waste and the leather produced by tanneries A and B in a competitive equilibrium. Second, we explain why this competitive equilibrium is inefficient from a societal standpoint. Third, we ascertain the socially optimal amount of leather produced by the two tanneries. Finally, we illustrate the working of our theoretical model with a specific example in which we use explicit functional forms and numbers.