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Climate change adaptation under heterogeneous beliefs

Author

Listed:
  • Marcel Nutz

    (Columbia University)

  • Florian Stebegg

    (Columbia University)

Abstract

We study strategic interactions between firms with heterogeneous beliefs about future climate impacts. To that end, we propose a Cournot-type equilibrium model where firms choose mitigation efforts and production quantities such as to maximize the expected profits under their subjective beliefs. It is shown that optimal mitigation efforts are increased by the presence of uncertainty and act as substitutes; i.e., one firm’s lack of mitigation incentivizes others to act more decidedly, and vice versa.

Suggested Citation

  • Marcel Nutz & Florian Stebegg, 2022. "Climate change adaptation under heterogeneous beliefs," Mathematics and Financial Economics, Springer, volume 16, number 3, June.
    • Handle: RePEc:spr:mathfi:v:16:y:2022:i:3:d:10.1007_s11579-022-00314-8
    DOI: 10.1007/s11579-022-00314-8
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    References listed on IDEAS

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    More about this item

    Keywords

    Climate change adaption; Heterogeneous beliefs; Cournot equilibrium;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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