Global warming: Prices versus quantities from a strategic point of view

Franz Wirl

Journal of Environmental Economics and Management, 2012, vol. 64, issue 2, 217-229

Abstract: This paper investigates how the choices of the instruments affect the interactions in a stock externality game (global warming) between cartelized fossil fuel suppliers and consumers. More precisely, the paper studies the equilibria in Markov strategies in a dynamic game with each player choosing either the quantity or the price strategy including short-run first mover advantages. Indeed OPEC and its opponent IEA have tried both instruments in the past and play currently in quantities. Given such a non-competitive setting, both players should prefer the price instrument. Therefore, both players are expected to switch back to price and tax policies if global warming will be treated effectively.

Keywords: Prices versus quantity; Carbon taxes versus permits; Differential games; Nash and Stackelberg; Global warming (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (30)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeeman:v:64:y:2012:i:2:p:217-229

DOI: 10.1016/j.jeem.2011.11.002

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