Regulating Environmental Externalities through Public Firms: A Differential Game
AbstractWe investigate the possibility of using public firms to regulate polluting emissions in a Cournot oligopoly where production generates pollution and public firms are less efficient than private ones. In a differential game we compare (i) the Markov-Perfect Nash equilibrium under social planning; (ii) the Markov Perfect Nash equilibrium in a mixed setup where public firms coexist with profit-seeking agents; (iii) the Cournot-Nash game among profit-seeking firms. In a mixed market, profit-seeking firms internalize the externality generated by production, and social welfare is the highest. We conclude that the creation of a mixed market can be desirable for the regulation of environmental externalities.
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Bibliographic InfoArticle provided by now publishers in its journal Strategic Behavior and the Environment.
Volume (Year): 4 (2014)
Issue (Month): 1 (April)
Contact details of provider:
Web page: http://www.nowpublishers.com/
Pollution; public firms; oligopoly; Markov perfect strategy;
Other versions of this item:
- D. Dragone & L. Lambertini & A. Palestini, 2011. "Regulating Environmental Externalities through Public Firms: A Differential Game," Working Papers wp738, Dipartimento Scienze Economiche, Universita' di Bologna.
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- D62 - Microeconomics - - Welfare Economics - - - Externalities
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises; Public-Private Enterprises
- Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Using public firms to regulate the environment
by Economic Logician in Economic Logic on 2011-04-29 14:46:00
- M. Fadaee, 2011. "A Dynamic Approach to the Environmental Effects of Trade Liberalization," Working Papers wp746, Dipartimento Scienze Economiche, Universita' di Bologna.
- F. Delbono & L. Lambertini, 2014. "Optimal firm' mix in oligopoly with twofold environmental externality," Working Papers wp955, Dipartimento Scienze Economiche, Universita' di Bologna.
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