Environmental standards and Cournot duopoly: a stability analysis
AbstractIn this paper the dynamical effects of public environmental policies are investigated in a Cournot duopoly with heterogeneous expectations in a context of limited rationality. It is shown that the introduction of upper limits to emissions always tends to destabilise and generate a chaotic market dynamics. By contrast the role played by the cost of the abatement technology is more complicated, although in most cases higher costs imply a higher likelihood of stability loss, in some cases increases of such costs when their level is sufficiently low tends to stabilise and in such cases if the market is stable either a decrease or an increase of such costs may lead to a stability loss. The policy implications of these results suggest caution in the use of environmental policies from a market stability point of view.
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Bibliographic InfoPaper provided by Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy in its series Discussion Papers with number 2012/154.
Date of creation: 01 Sep 2012
Date of revision:
Environmental policies; Bifurcation; Chaos; Cournot; Oligopoly.;
Find related papers by JEL classification:
- Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Costs; Distributional Effects; Employment Effects
- C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-11-03 (All new papers)
- NEP-BEC-2012-11-03 (Business Economics)
- NEP-ENE-2012-11-03 (Energy Economics)
- NEP-ENV-2012-11-03 (Environmental Economics)
- NEP-REG-2012-11-03 (Regulation)
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