The Effect of Access to Clean Technology on Pollution Reduction: an Experiment

Svetlana Pevnitskaya and Dmitry Ryvkin

Working Papers from Department of Economics, Florida State University

Abstract: We use a laboratory experiment to study decisions in a dynamic game where firms' private production leads to accumulation of a public bad, such as pollution. Firms have an option to invest in clean technology, which lowers their emissions, or contributions to the public bad. The main treatment variable is the type of access to clean technology, or benefits from such investment, which can be private or common. In the private access treatment, investment reduces the firm's own propensity to pollute. In the common access treatment, each firm's investment reduces all firms' propensity to pollute. For each treatment, we characterize two alternative solution concepts---the Markov perfect equilibrium and social optimum. The observed level of the public bad is lowest with common access to clean technology. This result remains in the presence of communication. The option to communicate induces coordination of investments in clean technology at a higher level, leading to lower average pollution levels in both treatments.

Keywords: dynamic games; public bad; experiment; environmental economics (search for similar items in EconPapers)
JEL-codes: C61 C72 C90 Q01 Q50 (search for similar items in EconPapers)
Pages: 38
Date: 2021-01
New Economics Papers: this item is included in nep-env, nep-exp and nep-gth
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Journal Article: The effect of access to clean technology on pollution reduction: An experiment (2022)
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