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Exploitation of a Productive Asset in the Presence of Strategic Behavior and Pollution Externalities

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  • N. Baris Vardar

    (GERAD, HEC Montréal, 3000 Côte-Sainte-Catherine, Montreal, QC H3T 2A7, Canada)

  • Georges Zaccour

    (Chair in Game Theory and Management, 3000 Côte-Sainte-Catherine, Montreal, QC H3T 2A7, Canada)

Abstract

We study the strategic behavior of firms competing in the exploitation of a common-access productive asset, in the presence of pollution externalities. We consider a differential game with two state variables (asset stock and pollution stock), and by using a piecewise-linear approximation of the nonlinear asset growth function, we provide a tractable characterization of the symmetric feedback–Nash equilibrium with asymptotically stable steady state(s). The results show that the firm’s strategy takes three forms depending on the pair of state variables and that different options for the model parameters lead to contrasting outcomes in both the short- and long-run equilibria.

Suggested Citation

  • N. Baris Vardar & Georges Zaccour, 2020. "Exploitation of a Productive Asset in the Presence of Strategic Behavior and Pollution Externalities," Mathematics, MDPI, vol. 8(10), pages 1-28, October.
    • Handle: RePEc:gam:jmathe:v:8:y:2020:i:10:p:1682-:d:422583
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    2. Colombo, Luca & Labrecciosa, Paola, 2022. "Product quality differentiation in a renewable resource oligopoly," Journal of Environmental Economics and Management, Elsevier, vol. 111(C).

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