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A Dynamic Multi-Objective Duopoly Game with Capital Accumulation and Pollution

Author

Listed:
  • Bertrand Crettez

    (CRED - Centre de Recherche en Economie et Droit - UP2 - Université Panthéon-Assas)

  • Naila Hayek

    (CRED - Centre de Recherche en Economie et Droit - UP2 - Université Panthéon-Assas)

  • Peter M. Kort

    (Department of Economics, University of Antwerp - Universiteit Antwerpen = University of Antwerp)

Abstract

This paper studies a discrete-time dynamic duopoly game with homogenous goods. Both firms have to decide on investment where investment increases production capacity so that they are able to put a larger quantity on the market. The downside, however, is that a larger quantity raises pollution. The firms have multiple objectives in the sense that each one maximizes the discounted profit stream and appreciates a clean environment as well. We obtain some surprising results. First, where it is known from the continuous-time differential game literature that firms invest more under a feedback information structure compared to an open-loop one, we detect scenarios where the opposite holds. Second, in a feedback Nash equilibrium, capital stock is more sensitive to environmental appreciation than in the open-loop case.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Bertrand Crettez & Naila Hayek & Peter M. Kort, 2021. "A Dynamic Multi-Objective Duopoly Game with Capital Accumulation and Pollution," Post-Print hal-04120451, HAL.
    • Handle: RePEc:hal:journl:hal-04120451
    DOI: 10.3390/math9161983
    Note: View the original document on HAL open archive server: https://univ-pantheon-assas.hal.science/hal-04120451v1
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    References listed on IDEAS

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    2. Kuzyutin, Denis & Smirnova, Nadezhda, 2023. "A dynamic multicriteria game of renewable resource extraction with environmentally concerned players," Economics Letters, Elsevier, vol. 226(C).

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