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The effect of emission charges on output and emissions in dynamic Cournot duopoly

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  • Mamada, Robert
  • Perrings, Charles

Abstract

We consider the effect of emission charges on market structure, output, and emissions in Cournot competition. Assuming myopic decision making and a partial adjustment process, we analyze the impact of emission charges on the stability of duopoly/monopoly and on the level of emissions. We show that where marginal emission charges are increasing in the level of emissions, duopoly is stable. However, where marginal emission charges are decreasing in emissions, duopoly is unstable, and the system converges on monopoly. Equilibrium output and emissions are also shown to be higher under cost structures favoring monopoly than under cost structures favoring duopoly.

Suggested Citation

  • Mamada, Robert & Perrings, Charles, 2020. "The effect of emission charges on output and emissions in dynamic Cournot duopoly," Economic Analysis and Policy, Elsevier, vol. 66(C), pages 370-380.
    • Handle: RePEc:eee:ecanpo:v:66:y:2020:i:c:p:370-380
    DOI: 10.1016/j.eap.2019.12.003
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    Cited by:

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    2. Halkos, George & Managi, Shunsuke, 2023. "New developments in the disciplines of environmental and resource economics," Economic Analysis and Policy, Elsevier, vol. 77(C), pages 513-522.
    3. Chen, Junlong & Sun, Chaoqun & Shi, Jiayan & Liu, Jiali, 2022. "Technology R&D and sharing in carbon emission reduction in a duopoly," Technological Forecasting and Social Change, Elsevier, vol. 183(C).
    4. Halkos, George E. & Papageorgiou, George J. & Halkos, Emmanuel G. & Papageorgiou, John G., 2020. "Public debt games with corruption and tax evasion," Economic Analysis and Policy, Elsevier, vol. 66(C), pages 250-261.
    5. Ahmad Naimzada & Marina Pireddu, 2023. "Dynamic approaches for the evaluation of the environmental policy efficacy in a nonlinear Cournot duopoly with differentiated goods and emission charges," Working Papers 517, University of Milano-Bicocca, Department of Economics.
    6. Ahmad Naimzada & Marina Pireddu, 2021. "On the detrimental effects of concave emission charges in a dynamic Cournot duopoly model," Working Papers 466, University of Milano-Bicocca, Department of Economics.

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