Government preference, environmental taxes and privatization

We analyse the relationship between the privatization of a public firm and government preferences for environmental tax revenue. The model that we consider is more general than the one consider in [15], in the sense that we put a larger weight in the environment tax revenue than on the other terms of the government´s objective function. The model has two stages. In the first stage, the government sets the environmental tax. Then, the firms engage in a Cournot competition, choosing output and pollution abatement levels.