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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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    Cited by:

    1. Wen-Hsien Tsai, 2018. "A Green Quality Management Decision Model with Carbon Tax and Capacity Expansion under Activity-Based Costing (ABC)—A Case Study in the Tire Manufacturing Industry," Energies, MDPI, vol. 11(7), pages 1-30, July.
    2. 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.
    3. Ye Duan & Nan Li & Hailin Mu & Shusen Gui, 2017. "Research on CO 2 Emission Reduction Mechanism of China’s Iron and Steel Industry under Various Emission Reduction Policies," Energies, MDPI, vol. 10(12), pages 1-24, December.
    4. Abdulla, Eman & Lim, King Yoong & Morris, Diego & Saliba, Faten, 2022. "Climate Change, Gender Equality, and Firm-Level Innovation : Cross-Country Evidence," The Warwick Economics Research Paper Series (TWERPS) 1429, University of Warwick, Department of Economics.
    5. Ioanna Pantelaiou & Panos Hatzipanayotou & Panagiotis Konstantinou & Anastasios Xepapadeas, 2020. "Can Cleaner Environment Promote International Trade? Environmental Policies as Export Promoting Mechanisms," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 75(4), pages 809-833, April.
    6. Feichtinger, Gustav & Lambertini, Luca & Leitmann, George & Wrzaczek, Stefan, 2022. "Managing the tragedy of commons and polluting emissions: A unified view," European Journal of Operational Research, Elsevier, vol. 303(1), pages 487-499.
    7. Christian Beyer & Elke Kottmann & Korbinian von Blanckenburg, 2020. "The Welfare Implications of the European Trucks Cartel," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 55(2), pages 120-126, March.
    8. Christian Beyer & Elke Kottmann & Korbinian von Blanckenburg, 2018. "The Welfare Implications of the European Trucks Cartel," MAGKS Papers on Economics 201818, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    9. Dragone, Davide & Lambertini, Luca & Palestini, Arsen, 2022. "Emission taxation, green innovations and inverted-U aggregate R&D efforts in a linear state differential game," Research in Economics, Elsevier, vol. 76(1), pages 62-68.
    10. Iwata, Hiroki, 2020. "Effects of competition forms and market structure on green innovation incentives," MPRA Paper 99305, University Library of Munich, Germany.

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    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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