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Pollution abatement and reservation prices in a market game

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  • Halkos, George
  • Papageorgiou, George

Abstract

In this paper we set up an oligopolistic market model, where firms invest in pollution abatement in order to increase the whole market size via an increase in the consumers’ reservation price. Moreover, we suppose that the demand function is not a linear one and the resulting game is not a usual linear quadratic one. In the considered model we investigate the open loop, the memory less closed-loop and the collusive patterns equilibrium. Additionally, we examine the social planning perspective. In the case of a convex demand we found the surprising result that the control and state variables have higher values in the open-loop steady state equilibrium than in the closed loop, while in a linear demand case the equilibrium is undetermined. In all cases we find that only if the market demand has concave curvature are the conclusions clear. A number of propositions and remarks are provided.

Suggested Citation

  • Halkos, George & Papageorgiou, George, 2012. "Pollution abatement and reservation prices in a market game," MPRA Paper 42150, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:42150
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    File URL: https://mpra.ub.uni-muenchen.de/42150/1/MPRA_paper_42150.pdf
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    References listed on IDEAS

    as
    1. Anderson, Simon P. & Engers, Maxim, 1992. "Stackelberg versus Cournot oligopoly equilibrium," International Journal of Industrial Organization, Elsevier, vol. 10(1), pages 127-135, March.
    2. Anderson, Simon P & Engers, Maxim, 1994. "Strategic Investment and Timing of Entry," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(4), pages 833-853, November.
    3. Steffen Huck & Hans-Theo Normann & Jörg Oechssler, 2002. "Stability of the Cournot process - experimental evidence," International Journal of Game Theory, Springer;Game Theory Society, vol. 31(1), pages 123-136.
    4. Forster, Bruce A., 1980. "Optimal energy use in a polluted environment," Journal of Environmental Economics and Management, Elsevier, vol. 7(4), pages 321-333, December.
    5. George E. Halkos & George J. Papageorgiou, 2012. "Pollution Control Policy: A Dynamic Taxation Scheme," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 6(1), pages 14-37, March.
    6. Kennedy Peter W., 1994. "Equilibrium Pollution Taxes in Open Economies with Imperfect Competition," Journal of Environmental Economics and Management, Elsevier, vol. 27(1), pages 49-63, July.
    7. Benchekroun, Hassan & van Long, Ngo, 1998. "Efficiency inducing taxation for polluting oligopolists," Journal of Public Economics, Elsevier, vol. 70(2), pages 325-342, November.
    8. George Halkos, 1994. "Optimal abatement of sulphur emissions in Europe," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 4(2), pages 127-150, April.
    9. Dockner,Engelbert J. & Jorgensen,Steffen & Long,Ngo Van & Sorger,Gerhard, 2000. "Differential Games in Economics and Management Science," Cambridge Books, Cambridge University Press, number 9780521637329.
    10. Halkos, George E., 1993. "Sulphur abatement policy: Implications of cost differentials," Energy Policy, Elsevier, vol. 21(10), pages 1035-1043, October.
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    Cited by:

    1. George Halkos & George Papageorgiou, 2013. "Dynamic modeling of pulse fishing: A game theoretic approach," DEOS Working Papers 1324, Athens University of Economics and Business.

    More about this item

    Keywords

    Oligopoly Game; non-linear demand; pollution abatement; reservation price;

    JEL classification:

    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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