Environmental Standards and Cournot Duopoly: A Stability Analysis

Luciano Fanti

Environmental & Resource Economics, 2015, vol. 61, issue 4, 577-593

Abstract: In this paper the dynamic effects of public environmental policies are investigated in a Cournot duopoly with both heterogeneous and homogeneous expectations in a context of limited rationality. It is shown that the increase in upper limits to emissions always tends to destabilise markets and generate a chaotic market dynamics in both cases. The policy implication of this result is that the use of environmental policies may favour market stability. It is also shown that higher costs of abatement technology entail a higher likelihood of stability loss (although in the heterogeneous expectations case also a decrease in costs may destabilise). Copyright Springer Science+Business Media Dordrecht 2015

Keywords: Environmental policies; Bifurcation; Chaos; Cournot; Oligopoly; Q52; C62; D43; L13 (search for similar items in EconPapers)
Date: 2015
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Working Paper: Environmental standards and Cournot duopoly: a stability analysis (2012)
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DOI: 10.1007/s10640-014-9807-7

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