Regulating Environmental Externalities through Public Firms: A Differential Game

Davide Dragone, Luca Lambertini () and Arsen Palestini ()

Strategic Behavior and the Environment, 2014, vol. 4, issue 1, 15-40

Abstract: We investigate the possibility of using public firms to regulate polluting emissions in a Cournot oligopoly where production generates pollution and public firms are less efficient than private ones. In a differential game we compare (i) the Markov-Perfect Nash equilibrium under social planning; (ii) the Markov Perfect Nash equilibrium in a mixed setup where public firms coexist with profit-seeking agents; (iii) the Cournot-Nash game among profit-seeking firms. In a mixed market, profit-seeking firms internalize the externality generated by production, and social welfare is the highest. We conclude that the creation of a mixed market can be desirable for the regulation of environmental externalities.

Keywords: Pollution; public firms; oligopoly; Markov perfect strategy (search for similar items in EconPapers)
JEL-codes: C73 D43 D62 L13 L32 Q50 (search for similar items in EconPapers)
Date: 2014
References: Add references at CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://dx.doi.org/10.1561/102.00000042 (application/xml)

Related works:
Working Paper: Regulating Environmental Externalities through Public Firms: A Differential Game (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:now:jnlsbe:102.00000042

Access Statistics for this article

More articles in Strategic Behavior and the Environment from now publishers
Bibliographic data for series maintained by Lucy Wiseman ().