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Consistency and Optimality in a Dynamic Game of Pollution Control I: Competition

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  • Batabyal, Amitrajeet A.

Abstract

I model the interaction between a regulator and polluting firms as a Stackelberg differential game in which the regulator leads. The firms create pollution, which results in a stock externality. I analyze the intertemporal effects of alternate pollution control measures in a competitive industry. The principal issue here concerns the dynamic inconsistency of the optimal solution. Inter alia, I compare the steady state levels of pollution under optimal and under time consistent policies.

Suggested Citation

  • Batabyal, Amitrajeet A., 1995. "Consistency and Optimality in a Dynamic Game of Pollution Control I: Competition," Working Papers 9529, Utah State University, Department of Economics.
  • Handle: RePEc:usu:wpaper:9529
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    References listed on IDEAS

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    1. Karp, Larry & Newbery, David M., 1993. "Intertemporal consistency issues in depletable resources," Handbook of Natural Resource and Energy Economics,in: A. V. Kneese† & J. L. Sweeney (ed.), Handbook of Natural Resource and Energy Economics, edition 1, volume 3, chapter 19, pages 881-931 Elsevier.
    2. Buiter, Willem H., 1984. "Policy Evaluation and Design for Continuous Time Linear Rational Expectations Models: Some Recent Developments," CEPR Discussion Papers 15, C.E.P.R. Discussion Papers.
    3. Frederick Ploeg & Aart Zeeuw, 1992. "International aspects of pollution control," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 2(2), pages 117-139, March.
    4. Amitrajeet Batabyal, 1996. "Consistency and optimality in a dynamic game of pollution control II: Monopoly," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 8(3), pages 315-330, October.
    5. Karp, Larry, 1984. "Optimality and consistency in a differential game with non-renewable resources," Journal of Economic Dynamics and Control, Elsevier, vol. 8(1), pages 73-97, October.
    6. Batabyal, Amitrajeet A., 1995. "Leading issues in domestic environmental regulation: A review essay," Ecological Economics, Elsevier, vol. 12(1), pages 23-39, January.
    7. Cropper, Maureen L & Oates, Wallace E, 1992. "Environmental Economics: A Survey," Journal of Economic Literature, American Economic Association, vol. 30(2), pages 675-740, June.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Batabyal, Amitrajeet A, 1998. "On land use, minerals development, and institutional design in the American west," Resources Policy, Elsevier, vol. 24(3), pages 139-146, September.
    2. Amitrajeet Batabyal, 1996. "Consistency and optimality in a dynamic game of pollution control II: Monopoly," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 8(3), pages 315-330, October.
    3. Halkos, George & Papageorgiou, George, 2012. "Simple taxation schemes on non–renewable resources extraction," MPRA Paper 40945, University Library of Munich, Germany.
    4. Mehrnoosh Khademi & Massimiliano Ferrara & Bruno Pansera & Mehdi Salimi, 2015. "A dynamic game on Green Supply Chain Management," Papers 1503.04772, arXiv.org.
    5. Halkos, George, 2010. "Dynamic regulations in non –renewable resources oligopolistic markets," MPRA Paper 24774, University Library of Munich, Germany.
    6. Eisenack, Klaus & Edenhofer, Ottmar & Kalkuhl, Matthias, 2012. "Resource rents: The effects of energy taxes and quantity instruments for climate protection," Energy Policy, Elsevier, vol. 48(C), pages 159-166.
    7. George E. HALKOS & George PAPAGEORGIOU, 2010. "Differential Games in Non–Renewable Resources Extraction," Theoretical and Practical Research in Economic Fields, ASERS Publishing, vol. 0(2), pages 232-243, December.
    8. Thomas Vallée, 1997. "Comparison of different Stackelberg solutions in a deterministic dynamic pollution control," Levine's Working Paper Archive 1406, David K. Levine.

    More about this item

    Keywords

    environmental; regulation; tax; dynamic; game;

    JEL classification:

    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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