We model the interplay between capital accumulation for production and environmental externalities in a differential oligopoly game with Ramsey dynamics. The external effect is determined, alternatively, by sales or production. While the externality does not affect the behaviour of profit-seeking firms, it may induce a benevolent planner to shrink sales as compared to the Cournot-Nash equilibrium because of a tradeoff between consumer surplus and the externality, if the latter is driven by sales. If instead it is determined by production, there emeges that the Ramsey golden rule is no longer socially optimal.
Dynamic Oligopoly with Capital Accumulation and Environmental Externality
DRAGONE, DAVIDE;LAMBERTINI, LUCA;
2010
Abstract
We model the interplay between capital accumulation for production and environmental externalities in a differential oligopoly game with Ramsey dynamics. The external effect is determined, alternatively, by sales or production. While the externality does not affect the behaviour of profit-seeking firms, it may induce a benevolent planner to shrink sales as compared to the Cournot-Nash equilibrium because of a tradeoff between consumer surplus and the externality, if the latter is driven by sales. If instead it is determined by production, there emeges that the Ramsey golden rule is no longer socially optimal.File in questo prodotto:
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