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.
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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.:
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