International competition between home and foreign oligopolistic firms producing identical goods to export to ａ third country is formulated assuming that home country's firms are emitting pollutants and the optimal polluting tax rate is determined for the home country. The optimal pollution tax rate is then interpreted for some special cases to show whether it is equal to, falls short of, or exceeds the marginal value of the domestic environmental damage. The equilibrium total supply of the good by the two countries is determined in the firstplace, which greatly simplifies the mathematical analysis of determining the optimal pollution tax rate, which otherwise might become very complicated.

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