Unequal Treatment of Identical Polluters in Cournot Equilibrium

Oligopoly models where firms and other agents take prior actions that subsequently affect the marginal costs have long been useful in illuminating policy debates with respect to antitrust regulation, environmental protection, and international competition. In this paper we illustrate the relevance in an environmental Cournot game, where the production technology is characterised by constant returns to scale. It is shown that an asymmetric distribution of emission quotas can be optimal in some, but not all, cases.