Tax/subsidy model of environmental differentiation competition of product

Current research on tax incentive theory of environmental differentiation competition is simple, this paper sets up a duopoly model of product differentiation, by which we analyzes the impacts of pollution taxation, clean subsidy, self-financing tax/subsidy mechanism, and compulsive minimum standard of environment quality on environmental quality competition. Our conclusion is that clean subsidy has more incentive effect in improving environmental quality of product than pollution taxation and self-financing tax/subsidy mechanism but it need enough financial supports from government.. Compulsive minimum standard of government, which is especially suitable for a poor government, is a good complement of these tools because it avoids environmental deterioration from excess competition.