Global warming: Prices versus quantities from a strategic point of view
AbstractThis paper investigates how the choices of the instruments affect the interactions in a stock externality game (global warming) between cartelized fossil fuel suppliers and consumers. More precisely, the paper studies the equilibria in Markov strategies in a dynamic game with each player choosing either the quantity or the price strategy including short-run first mover advantages. Indeed OPEC and its opponent IEA have tried both instruments in the past and play currently in quantities. Given such a non-competitive setting, both players should prefer the price instrument. Therefore, both players are expected to switch back to price and tax policies if global warming will be treated effectively.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Environmental Economics and Management.
Volume (Year): 64 (2012)
Issue (Month): 2 ()
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Web page: http://www.elsevier.com/locate/inca/622870
Prices versus quantity; Carbon taxes versus permits; Differential games; Nash and Stackelberg; Global warming;
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