Dynamic nonpoint-source pollution control policy: Ambient transfers and uncertainty
AbstractWhen a regulator cannot observe or infer individual emissions, corrective policy must rely on ambient pollution data. Assuming this kind of environment, we study a class of differential games of pollution control with profit functions that are polynomial in the global pollution stock. Given an open-loop emissions strategy satisfying mild regularity conditions, an ambient transfer scheme is exhibited that induces it in Markov-perfect equilibrium (MPE). Proposed transfers are a polynomial function of the difference between actual and desired pollution levels; moreover, they are designed so that in MPE no tax or subsidy is ever levied. Their applicability under stochastic pollution dynamics is studied for a symmetric game of polluting oligopolists with linear demand. We discuss a quadratic scheme that induces agents to adopt Markovian emission strategies that are stationary and linearly decreasing in total pollution. Total expected ambient transfers are non-positive and their magnitude is linearly increasing in physical volatility, the size of the economy, and the absolute value of the slope of the inverse demand function. However, if the regulator is interested in inducing a constant emissions strategy then, in expectation, transfers vanish. The total expected ambient transfer is compared to its point-source equivalent.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Dynamics and Control.
Volume (Year): 34 (2010)
Issue (Month): 12 (December)
Contact details of provider:
Web page: http://www.elsevier.com/locate/jedc
Differential games Nonpoint source pollution Stochastic dynamics Policy design;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Spraggon, John, 2002.
"Exogenous targeting instruments as a solution to group moral hazards,"
Journal of Public Economics,
Elsevier, vol. 84(3), pages 427-456, June.
- John Spraggon, 1998. "Exogenous Targeting Instruments as a Solution to Group Moral Hazards," Department of Economics Working Papers 1998-01, McMaster University.
- Karp Larry & Livernois John, 1994.
"Using Automatic Tax Changes to Control Pollution Emissions,"
Journal of Environmental Economics and Management,
Elsevier, vol. 27(1), pages 38-48, July.
- Livernois, J. & Karp, L., 1992. "Using Automatic Tax Changes to Control Pollution Emissions," Working Papers 1992-12, University of Guelph, Department of Economics.
- Wirl, Franz, 2007. "Do multiple Nash equilibria in Markov strategies mitigate the tragedy of the commons?," Journal of Economic Dynamics and Control, Elsevier, vol. 31(11), pages 3723-3740, November.
- Ken-Ichi Akao, 2008. "Tax schemes in a class of differential games," Economic Theory, Springer, vol. 35(1), pages 155-174, April.
- Wang, Wen-Kai & Ewald, Christian-Oliver, 2010. "A stochastic differential Fishery game for a two species fish population with ecological interaction," Journal of Economic Dynamics and Control, Elsevier, vol. 34(5), pages 844-857, May.
- Dockner,Engelbert J. & Jorgensen,Steffen & Long,Ngo Van & Sorger,Gerhard, 2000. "Differential Games in Economics and Management Science," Cambridge Books, Cambridge University Press, number 9780521637329.
- Tsutsui, Shunichi & Mino, Kazuo, 1990. "Nonlinear strategies in dynamic duopolistic competition with sticky prices," Journal of Economic Theory, Elsevier, vol. 52(1), pages 136-161, October.
- Segerson, Kathleen, 1988. "Uncertainty and incentives for nonpoint pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 15(1), pages 87-98, March.
- Kossioris, G. & Plexousakis, M. & Xepapadeas, A. & Zeeuw, A.J. de & Mäler, K-G., 2008.
"Feedback Nash equilibria for non-linear differential games in pollution control,"
Open Access publications from Tilburg University
urn:nbn:nl:ui:12-378255, Tilburg University.
- Kossioris, G. & Plexousakis, M. & Xepapadeas, A. & de Zeeuw, A. & Mäler, K.-G., 2008. "Feedback Nash equilibria for non-linear differential games in pollution control," Journal of Economic Dynamics and Control, Elsevier, vol. 32(4), pages 1312-1331, April.
- Xepapadeas, A. P., 1992. "Environmental policy design and dynamic nonpoint-source pollution," Journal of Environmental Economics and Management, Elsevier, vol. 23(1), pages 22-39, July.
- MÃ¤ler, K-G. & Xepapadeas, A. & Zeeuw, A.J. de, 2000.
"The Economics of Shallow Lakes,"
2000-69, Tilburg University, Center for Economic Research.
- François Cochard & Marc Willinger & Anastasios Xepapadeas, 2005. "Efficiency of Nonpoint Source Pollution Instruments: An Experimental Study," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 30(4), pages 393-422, 04.
- Karp, Larry, 1998.
"Nonpoint Source Pollution Taxes and Excessive Tax Burden,"
Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series
qt4z62b52k, Department of Agricultural & Resource Economics, UC Berkeley.
- Larry Karp, 2005. "Nonpoint Source Pollution Taxes and Excessive Tax Burden," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 31(2), pages 229-251, 06.
- Dockner Engelbert J. & Van Long Ngo, 1993. "International Pollution Control: Cooperative versus Noncooperative Strategies," Journal of Environmental Economics and Management, Elsevier, vol. 25(1), pages 13-29, July.
- Benchekroun, Hassan & van Long, Ngo, 1998.
"Efficiency inducing taxation for polluting oligopolists,"
Journal of Public Economics,
Elsevier, vol. 70(2), pages 325-342, November.
- Hassan Benchekroun & Ngo Van Long, 1997. "Efficiency Inducing Taxation for Polluting Oligopolists," CIRANO Working Papers 97s-21, CIRANO.
- Merton, Robert C., 1973.
"An asymptotic theory of growth under uncertainty,"
673-73., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Dockner, Engelbert J. & Van Long, Ngo & Sorger, Gerhard, 1996. "Analysis of Nash equilibria in a class of capital accumulation games," Journal of Economic Dynamics and Control, Elsevier, vol. 20(6-7), pages 1209-1235.
- Cox, John C & Ingersoll, Jonathan E, Jr & Ross, Stephen A, 1985. "A Theory of the Term Structure of Interest Rates," Econometrica, Econometric Society, vol. 53(2), pages 385-407, March.
- Boldrin, Michele & Montrucchio, Luigi, 1986. "On the indeterminacy of capital accumulation paths," Journal of Economic Theory, Elsevier, vol. 40(1), pages 26-39, October.
- Gerhard Sorger, 2005. "A dynamic common property resource problem with amenity value and extraction costs," International Journal of Economic Theory, The International Society for Economic Theory, vol. 1(1), pages 3-19.
- Tsur, Yacov & de Gorter, Harry, 2012. "Dynamic regulation of nonpoint source pollution when the number of emitters is large," Discussion Papers 122124, Hebrew University of Jerusalem, Department of Agricultural Economics and Management.
- Ewald, Christian-Oliver & Wang, Wen-Kai, 2011. "Analytic solutions for infinite horizon stochastic optimal control problems via finite horizon approximation: A practical guide," Mathematical Social Sciences, Elsevier, vol. 61(3), pages 146-151, May.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wendy Shamier).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.