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Global warming: Prices versus quantities from a strategic point of view

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  • Wirl, Franz

Abstract

This paper investigates how the choices of the instruments affect the interactions in a stock externality game (global warming) between cartelized fossil fuel suppliers and consumers. More precisely, the paper studies the equilibria in Markov strategies in a dynamic game with each player choosing either the quantity or the price strategy including short-run first mover advantages. Indeed OPEC and its opponent IEA have tried both instruments in the past and play currently in quantities. Given such a non-competitive setting, both players should prefer the price instrument. Therefore, both players are expected to switch back to price and tax policies if global warming will be treated effectively.

Suggested Citation

  • Wirl, Franz, 2012. "Global warming: Prices versus quantities from a strategic point of view," Journal of Environmental Economics and Management, Elsevier, vol. 64(2), pages 217-229.
  • Handle: RePEc:eee:jeeman:v:64:y:2012:i:2:p:217-229 DOI: 10.1016/j.jeem.2011.11.002
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    References listed on IDEAS

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    Cited by:

    1. Elisabetta Cornago & Renaud Foucart, 2014. "Instrument Choice and Cost Uncertainty in the Electricity Market," Working Papers ECARES ECARES 2014-13, ULB -- Universite Libre de Bruxelles.
    2. de la Croix, David & Gosseries, Axel, 2012. "The natalist bias of pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 63(2), pages 271-287.
    3. Michael Caputo & Chen Ling, 2015. "Intrinsic Comparative Dynamics of Locally Differentiable Feedback Stackelberg Equilibria," Dynamic Games and Applications, Springer, vol. 5(1), pages 1-25, March.
    4. Chen, Shang-Yu, 2016. "Green helpfulness or fun? Influences of green perceived value on the green loyalty of users and non-users of public bikes," Transport Policy, Elsevier, vol. 47(C), pages 149-159.
    5. Strand, Jon, 2013. "Strategic climate policy with offsets and incomplete abatement: Carbon taxes versus cap-and-trade," Journal of Environmental Economics and Management, Elsevier, vol. 66(2), pages 202-218.
    6. Larry Karp & Sauleh Siddiqui & Jon Strand, 2016. "Dynamic Climate Policy with Both Strategic and Non-strategic Agents: Taxes Versus Quantities," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 65(1), pages 135-158, September.
    7. Strand,Jon, 2016. "Assessment of net mitigation in the context of international greenhouse gas emissions control mechanisms," Policy Research Working Paper Series 7594, The World Bank.
    8. Nachtigall, Daniel, 2017. "Prices versus quantities: The impact of fracking on the choice of climate policy instruments in the presence of OPEC," Discussion Papers 2017/6, Free University Berlin, School of Business & Economics.
    9. Wirl, Franz, 2014. "Taxes versus permits as incentive for the intertemporal supply of a clean technology by a monopoly," Resource and Energy Economics, Elsevier, vol. 36(1), pages 248-269.
    10. L. Lambertini, 2014. "On the Interplay between Resource Extraction and Polluting Emissions in Oligopoly," Working Papers wp976, Dipartimento Scienze Economiche, Universita' di Bologna.
    11. Santiago Rubio, 2011. "On Capturing Rent from a Non-renewable Resource International Monopoly: Prices Versus Quantities," Dynamic Games and Applications, Springer, vol. 1(4), pages 558-580, December.
    12. Karolina Ryszka & Cees Withagen, 2016. "Unilateral Climate Policies: Incentives and Effects," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 63(2), pages 471-504, February.
    13. David Newbery, 2016. "Policies for decarbonizing a liberalized power sector," Cambridge Working Papers in Economics 1614, Faculty of Economics, University of Cambridge.
    14. Christoph Bohringer, Knut Einar Rosendahl, and Jan Schneider, 2014. "Unilateral Climate Policy: Can OPEC Resolve the Leakage Problem?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    15. Chen, Shang-Yu, 2016. "Using the sustainable modified TAM and TPB to analyze the effects of perceived green value on loyalty to a public bike system," Transportation Research Part A: Policy and Practice, Elsevier, vol. 88(C), pages 58-72.
    16. Daniel Nachtigall, 2017. "Prices versus Quantities: The Impact of Fracking on the Choice of Climate Policy Instruments in the Presence of OPEC," Working Papers 2017001, Berlin Doctoral Program in Economics and Management Science (BDPEMS).
    17. Lawrence H. Goulder & Andrew Schein, 2013. "Carbon Taxes vs. Cap and Trade: A Critical Review," NBER Working Papers 19338, National Bureau of Economic Research, Inc.
    18. Ian A. MacKenzie, 2015. "Prices versus quantities with distributional rent seeking," Discussion Papers Series 548, School of Economics, University of Queensland, Australia.

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