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Adoption of a Cleaner Technology by a Monopoly Under Incomplete Information

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  • Ben Youssef, Slim

Abstract

We consider a model consisting of a monopolistic firm producing a certain good with pollution. This firm can adopt a cleaner technology within a finite time by incurring an investment cost decreasing exponentially with the adoption date. At each period of time, the firm is regulated by an emission tax which induces the socially optimal pollution and production levels, and a lump sum tax on profit. The firm is induced to adopt the cleaner technology at the socially optimal date by an appropriate innovation subsidy. In the incomplete information context, the firm has private information concerning the cost of acquiring the new technology. By an appropriate contract consisting of an adoption date and a R&D subsidy depending on the value of the innovation cost parameter announced by the firm, the regulator can induce the latter to reveal the true value of its private information in compensation of a socially costly intertemporal informational rent. However, the socially optimal adoption date of incomplete information is delayed with respect to the complete information one.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 9879.

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Date of creation: Jun 2008
Date of revision: Jul 2008
Handle: RePEc:pra:mprapa:9879

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Keywords: cleaner technology; adoption date; incomplete information;

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  1. 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.
  2. Ballard, Charles L & Shoven, John B & Whalley, John, 1985. "General Equilibrium Computations of the Marginal Welfare Costs of Taxes in the United States," American Economic Review, American Economic Association, vol. 75(1), pages 128-38, March.
  3. Rodney Ludema & Taizo Takeno, 2006. "Tariffs and the Adoption of Clean Technology Under Asymmetric Information," Working Papers gueconwpa~06-06-09, Georgetown University, Department of Economics.
  4. Farzin, Y H & Kort, P M, 2000. " Pollution Abatement Investment When Environmental Regulation Is Uncertain," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 2(2), pages 183-212.
  5. Kwerel, Evan, 1977. "To Tell the Truth: Imperfect Information and Optimal Pollution Control," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 595-601, October.
  6. Laffont, Jean-Jacques & Tirole, Jean, 1986. "Using Cost Observation to Regulate Firms," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 614-41, June.
  7. Milliman, Scott R. & Prince, Raymond, 1989. "Firm incentives to promote technological change in pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 17(3), pages 247-265, November.
  8. Stranlund, John K., 1997. "Public Technological Aid to Support Compliance to Environmental Standards," Journal of Environmental Economics and Management, Elsevier, vol. 34(3), pages 228-239, November.
  9. Jung, Chulho & Krutilla, Kerry & Boyd, Roy, 1996. "Incentives for Advanced Pollution Abatement Technology at the Industry Level: An Evaluation of Policy Alternatives," Journal of Environmental Economics and Management, Elsevier, vol. 30(1), pages 95-111, January.
  10. Laffont, Jean-Jacques, 1994. "The New Economics of Regulation Ten Years After," Econometrica, Econometric Society, vol. 62(3), pages 507-37, May.
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Cited by:
  1. Ben Youssef, Slim, 2010. "Timing of adoption of clean technologies by regulated monopolies," MPRA Paper 42470, University Library of Munich, Germany, revised Sep 2012.
  2. Ben Youssef, Slim, 2010. "Adoption of a clean technology using a renewable energy," MPRA Paper 25576, University Library of Munich, Germany.

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