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Cournot Competition and "Green" Innovation: An Inverted-U Relationship

Author

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  • Luca Lambertini

    () (Department of Economics, University of Bologna, Italy; The Rimini Centre for Economic Analysis, Italy)

  • Joanna Poyago-Theotoky

    () (School of Economics, La Trobe University, Australia; The Rimini Centre for Economic Analysis, Italy)

  • Alessandro Tampieri

    () (Faculty of Law, Economics and Finance, University of Luxembourg, Luxembourg)

Abstract

We examine the relationship between competition and innovation in an industry where production is polluting and R&D aims to reduce emissions ("green" innovation). We present an n-firm oligopoly where firms compete in quantities and decide their investment in "green" R&D. When environmental taxation is exogenous, aggregate R&D investment always increases with the number of firms in the industry. Next we analyse the case where the emission tax is set endogenously by a regulator (committed or time-consistent) with the aim to maximize social welfare. We show that an inverted-U relationship exists between aggregate R&D and industry size under reasonable conditions, and is driven by the presence of R&D spillovers.

Suggested Citation

  • Luca Lambertini & Joanna Poyago-Theotoky & Alessandro Tampieri, 2015. "Cournot Competition and "Green" Innovation: An Inverted-U Relationship," Working Paper series 15-21, Rimini Centre for Economic Analysis.
  • Handle: RePEc:rim:rimwps:15-21
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    References listed on IDEAS

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    Cited by:

    1. Lambertini, Luca & Poyago-Theotoky, Joanna & Tampieri, Alessandro, 2017. "Cournot competition and “green” innovation: An inverted-U relationship," Energy Economics, Elsevier, vol. 68(C), pages 116-123.

    More about this item

    JEL classification:

    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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