IDEAS home Printed from https://ideas.repec.org/p/drm/wpaper/2018-48.html
   My bibliography  Save this paper

Cobb-Douglas preferences and pollution in a bilateral oligopoly market

Author

Listed:
  • Anicet Kabre

Abstract

In this note, we introduce pollution and examine its effects in a finite bilateral oligopoly model where agents have asymmetric Cobb-Douglas preferences. We define two strategic equilibria: the Stackelberg-Cournot equilibrium with pollution (SCEP) and the Cournot equilibrium with pollution (CEP). While the supplied quantities of the polluting and the non-polluting good depend on the preferences of all economic agents in the case of symmetric preferences, we show that when preferences are asymmetric, i) at both equilibria, each polluter’s equilibrium supply depends only on the non-polluters’ preferences for the non-polluting good; ii) at the CEP and the SCEP, the elasticity of the polluters emissions is greater when nonpolluters preferences for the non-polluting good increase, compared to an increase in their own preferences for this good; iii) firm’s emissions’elasticity decreases with the market power if their marginal cost is lower than their competitor.

Suggested Citation

  • Anicet Kabre, 2018. "Cobb-Douglas preferences and pollution in a bilateral oligopoly market," EconomiX Working Papers 2018-48, University of Paris Nanterre, EconomiX.
  • Handle: RePEc:drm:wpaper:2018-48
    as

    Download full text from publisher

    File URL: https://economix.fr/pdf/dt/2018/WP_EcoX_2018-48.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Bloch, Francis & Ferrer, Helene, 2001. "Strategic complements and substitutes in bilateral oligopolies," Economics Letters, Elsevier, vol. 70(1), pages 83-87, January.
    2. Bloch, Francis & Ghosal, Sayantan, 1997. "Stable Trading Structures in Bilateral Oligopolies," Journal of Economic Theory, Elsevier, vol. 74(2), pages 368-384, June.
    3. Amir, Rabah & Sahi, Siddharta & Shubik, Martin & Yao, Shuntian, 1990. "A strategic market game with complete markets," Journal of Economic Theory, Elsevier, vol. 51(1), pages 126-143, June.
    4. Dickson, Alex & MacKenzie, Ian A., 2018. "Strategic trade in pollution permits," Journal of Environmental Economics and Management, Elsevier, vol. 87(C), pages 94-113.
    5. Hege Westskog, 1996. "Market Power in a System of Tradeable CO2 Quotas," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 85-103.
    6. Ludovic A. Julien & Fabrice Tricou, 2012. "Market Price Mechanisms And Stackelberg General Equilibria: An Example," Bulletin of Economic Research, Wiley Blackwell, vol. 64(2), pages 239-252, April.
    7. María-Eugenia Sanin & Skerdilajda Zanaj, 2011. "A Note on Clean Technology Adoption and its Influence on Tradeable Emission Permits Prices," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 48(4), pages 561-567, April.
    8. Sahi, Siddhartha & Yao, Shuntian, 1989. "The non-cooperative equilibria of a trading economy with complete markets and consistent prices," Journal of Mathematical Economics, Elsevier, vol. 18(4), pages 325-346, September.
    9. Dickson, Alex & Hartley, Roger, 2008. "The strategic Marshallian cross," Games and Economic Behavior, Elsevier, vol. 64(2), pages 514-532, November.
    10. Martin Shubik & Jingang Zhao, 1990. "A Strategic Market Game of a Finite Economy with a Mutual Bank," Cowles Foundation Discussion Papers 961, Cowles Foundation for Research in Economics, Yale University.
    11. Sanin, Maria-Eugenia & Zanaj, Skerdilajda, 2012. "Clean Technology Adoption Under Cournot Competition," Strategic Behavior and the Environment, now publishers, vol. 2(2), pages 159-172, July.
    12. Shapley, Lloyd S & Shubik, Martin, 1977. "Trade Using One Commodity as a Means of Payment," Journal of Political Economy, University of Chicago Press, vol. 85(5), pages 937-968, October.
    13. Robert W. Hahn, 1984. "Market Power and Transferable Property Rights," The Quarterly Journal of Economics, Oxford University Press, vol. 99(4), pages 753-765.
    14. Misiolek, Walter S. & Elder, Harold W., 1989. "Exclusionary manipulation of markets for pollution rights," Journal of Environmental Economics and Management, Elsevier, vol. 16(2), pages 156-166, March.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Bilateral oligopoly; Pollution; Cobb-Douglas preferences;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:drm:wpaper:2018-48. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Valerie Mignon). General contact details of provider: http://edirc.repec.org/data/modemfr.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.