Environmental Innovation, War of Attrition and Investment Grants
AbstractThe paper analyses the timing of spontaneous environmental innovation when second-mover advantages, arising from the expectation of declining investment costs, increase the option value of waiting created by investment irreversibility and uncertainty about private payoffs. We then focus on the design of public subsidies aimed at bridging the gap between the spontaneous time of technological change and the socially desirable one. Under network externalities and incomplete information about firms’ switching costs, auctioning investment grants appears to be a cost-effective way of accelerating pollution abatement, in that it allows targeting grants instead of subsidizing the entire industry indiscriminately.
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.
Bibliographic InfoPaper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2004.156.
Date of creation: Dec 2004
Date of revision:
Environmental innovation; Investment irreversibility; Network externalities; Investment grants; Second-price auction;
Other versions of this item:
- Cesare Dosi & Michele Moretto, 2010. "Environmental Innovation, War Of Attrition And Investment Grants," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 12(01), pages 37-59.
- Cesare Dosi & Michele Moretto, . "Environmental Innovation, War of Attrition and Investment Grants," Working Papers ubs0406, University of Brescia, Department of Economics.
- Cesare Dosi & Michele Moretto, 2007. "Environmental Innovation, War of Attrition and Investment Grants," "Marco Fanno" Working Papers 0045, Dipartimento di Scienze Economiche "Marco Fanno".
- Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
- O38 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Government Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-01-16 (All new papers)
- NEP-ENE-2005-01-16 (Energy Economics)
- NEP-ENV-2005-01-16 (Environmental Economics)
- NEP-NET-2005-01-16 (Network Economics)
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.:
- Moretto, Michele, 2000. "Irreversible investment with uncertainty and strategic behavior," Economic Modelling, Elsevier, vol. 17(4), pages 589-617, December.
- Jeremy I. Bulow & Paul Klemperer, 1996.
"The Generalized War of Attrition,"
Cowles Foundation Discussion Papers
1142, Cowles Foundation for Research in Economics, Yale University.
- Bulow, Jeremy I & Klemperer, Paul, 1997. "The Generalized War of Attrition," CEPR Discussion Papers 1564, C.E.P.R. Discussion Papers.
- Jeremy Bulow & Paul Klemperer, 1997. "The Generalized War of Attrition," NBER Working Papers 5872, National Bureau of Economic Research, Inc.
- Paul Klemperer & Jeremy Bulow, 1997. "The Generalized War of Attrition," Economics Series Working Papers 1998-W01, University of Oxford, Department of Economics.
- Paul Klemperer & Jeremy Bulow, 1999. "The Generalized War of Attrition," Game Theory and Information 9901004, EconWPA.
- Steven R. Grenadier, 2002. "Option Exercise Games: An Application to the Equilibrium Investment Strategies of Firms," Review of Financial Studies, Society for Financial Studies, vol. 15(3), pages 691-721.
- Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-40, June.
- Cesare Dosi & Michele Moretto, 1997. "Pollution Accumulation and Firm Incentives to Accelerate Technological Change Under Uncertain Private Benefits," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 10(3), pages 285-300, October.
- Lambrecht, Bart & Perraudin, William, 2003. "Real options and preemption under incomplete information," Journal of Economic Dynamics and Control, Elsevier, vol. 27(4), pages 619-643, February.
- Bliss, Christopher & Nalebuff, Barry, 1984. "Dragon-slaying and ballroom dancing: The private supply of a public good," Journal of Public Economics, Elsevier, vol. 25(1-2), pages 1-12, November.
- Harrison, J. Michael & Kreps, David M., 1979. "Martingales and arbitrage in multiperiod securities markets," Journal of Economic Theory, Elsevier, vol. 20(3), pages 381-408, June.
- McDonald, Robert & Siegel, Daniel, 1986. "The Value of Waiting to Invest," The Quarterly Journal of Economics, MIT Press, vol. 101(4), pages 707-27, November.
- Cox, John C. & Ross, Stephen A., 1976. "The valuation of options for alternative stochastic processes," Journal of Financial Economics, Elsevier, vol. 3(1-2), pages 145-166.
- Joseph Farrell & Garth Saloner, 1984.
"Standardization, Compatibility and Innovation,"
345, Massachusetts Institute of Technology (MIT), Department of Economics.
- Cesare Dosi & Michèle Moretto, 1998. "Auctioning green investment grants as a means of accelerating environmental innovation," Revue d'Économie Industrielle, Programme National Persée, vol. 83(1), pages 99-110.
- Mason, Robin & Weeds, Helen, 2001. "Irreversible Investment with Strategic Interactions," CEPR Discussion Papers 3013, C.E.P.R. Discussion Papers.
- Mauer, David C. & Ott, Steven H., 1995. "Investment under Uncertainty: The Case of Replacement Investment Decisions," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 30(04), pages 581-605, December.
- Paolo M. Panteghini & Michele Moretto, 2007.
"Preemption, Start-Up Decisions and the Firms' Capital Structure,"
AccessEcon, vol. 4(39), pages 1-14.
- Michele Moretto & Paolo Panteghini, 2007. "Preemption, Start-Up Decisions and the Firms’ Capital Structure," CESifo Working Paper Series 2006, CESifo Group Munich.
- Ben Youssef, Slim, 2010. "Timing of adoption of clean technologies by regulated monopolies," MPRA Paper 42470, University Library of Munich, Germany, revised Sep 2012.
- Michele Moretto, 2003.
"Competition and Irreversible Investments under Uncertainty,"
2003.32, Fondazione Eni Enrico Mattei.
- Moretto, Michele, 2008. "Competition and irreversible investments under uncertainty," Information Economics and Policy, Elsevier, vol. 20(1), pages 75-88, March.
- Michele Moretto, 2007. "Competition and Irreversible Investments under Uncertainty," "Marco Fanno" Working Papers 0058, Dipartimento di Scienze Economiche "Marco Fanno".
- Massimiliano Mazzanti & Roberto Zoboli, 2006. "Examining the Factors Influencing Environmental Innovations," Working Papers 2006.20, Fondazione Eni Enrico Mattei.
- Ben Jebli, Mehdi & Ben Youssef, Slim, 2012.
"Timing of adoption of clean technologies, transboundary pollution and international trade,"
42467, University Library of Munich, Germany.
- Ben Jebli, Mehdi & Ben Youssef, Slim, 2013. "Timing of adoption of clean technologies, transboundary pollution and international trade," Economics Discussion Papers 2013-50, Kiel Institute for the World Economy.
- Du Bois, Rodrigo Salcedo & Macias, Miguel Angel Gutierrez, 2013. "Cooperation makes it happen? Groundwater management in Aguascalientes, Mexico: An experimental approach," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 151139, Agricultural and Applied Economics Association.
- repec:ebl:ecbull:v:4:y:2007:i:39:p:1-14 is not listed on IDEAS
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (barbara racah).
If references are entirely missing, you can add them using this form.