The Irreversible Pollution Game

Raouf Bouccekine (), Weihua Ruan () and Benteng Zou
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Raouf Bouccekine: Rennes School of Business
Weihua Ruan: Purdue University Northwest

DEM Discussion Paper Series from Department of Economics at the University of Luxembourg

Abstract: We study a 2-country differential game with irreversible pollution. Irreversibil- ity is of a hard type: above a certain threshold level of pollution, the self-cleaning capacity of Nature drops to zero. Accordingly, the game includes a non-concave fea- ture, and we characterize both the cooperative and non-cooperative versions with this general non-LQ property. We deliver full analytical results for the existence of Markov Perfect Equilibria. We first demonstrate that when pollution costs are equal across players (symmetry), irreversible pollution regimes are more frequently reached than under cooperation. Second, we study the implications of asymmetry in the pollution cost. We find far nontrivial results on the reachability of the ir- reversible regime. However, we unambiguously prove that, for the same total cost of pollution, provided the irreversible regime is reached in both the symmetric and asymmetric cases, long-term pollution is larger in the symmetric case, reflecting more intensive free-riding under symmetry.

Keywords: Differential games; Irreversible pollution; Non-concave pollution decay; Asymmetric pollution cost; Markov Perfect Equilibria. (search for similar items in EconPapers)
JEL-codes: C61 C72 Q53 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-ene, nep-env, nep-gth and nep-ore
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Related works:
Journal Article: The irreversible pollution game (2023)
Working Paper: The Irreversible Pollution Game (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:luc:wpaper:22-03

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