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Environmental Innovation, War of Attrition and Investment Grants

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  • Cesare Dosi
  • Michele Moretto

Abstract

The paper analyses the timing of spontaneous environmental innovation when second-mover advantages, arising from the expectation of declining investment costs, increase the option value of waiting created by investment irreversibility and uncertainty about private payoffs. We then focus on the design of public subsidies aimed at bridging the gap between the spontaneous time of technological change and the socially desirable one. Under network externalities and incomplete information about firms' switching costs, auc- tioning investment grants appears to be a cost-effective way of accelerating pollution abatement, in that it allows targeting grants instead of subsidizing the entire industry indiscriminately

Suggested Citation

  • Cesare Dosi & Michele Moretto, "undated". "Environmental Innovation, War of Attrition and Investment Grants," Working Papers ubs0406, University of Brescia, Department of Economics.
    • Handle: RePEc:ubs:wpaper:ubs0406
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Ben Jebli, Mehdi & Ben Youssef, Slim, 2014. "Timing of adoption of clean technologies, transboundary pollution and international trade," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 8, pages 1-31.
    2. Moretto, Michele, 2008. "Competition and irreversible investments under uncertainty," Information Economics and Policy, Elsevier, vol. 20(1), pages 75-88, March.
    3. Massimiliano Mazzanti & Roberto Zoboli, 2006. "Examining the Factors Influencing Environmental Innovations," Working Papers 2006.20, Fondazione Eni Enrico Mattei.
    4. Du Bois, Rodrigo Salcedo & Macias, Miguel Angel Gutierrez, 2013. "Cooperation makes it happen? Groundwater management in Aguascalientes, Mexico: An experimental approach," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 151139, Agricultural and Applied Economics Association.
    5. Paolo M. Panteghini & Michele Moretto, 2007. "Preemption, Start-Up Decisions and the Firms' Capital Structure," Economics Bulletin, AccessEcon, vol. 4(39), pages 1-14.
    6. repec:ebl:ecbull:v:4:y:2007:i:39:p:1-14 is not listed on IDEAS

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    More about this item

    JEL classification:

    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology
    • C0 - Mathematical and Quantitative Methods - - General
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics

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