Incentive equilibrium strategies of transboundary industrial pollution control under emission permit trading

Huiquan Li and Shiping Mao

Journal of Management Analytics, 2019, vol. 6, issue 2, 107-134

Abstract: In this paper, we investigate the incentive equilibrium strategies of two neighboring regions facing transboundary industrial pollution under abatement investment and emission permits trading in a differential game setting. Our paper can be viewed as an extension of the work of Yeung [2007. Dynamically consistent cooperative solution in a differential game of transboundary industrial pollution. Journal of Optimization Theory and Applications, 134, 143–160] in the context of the transboundary industrial pollution. Compared with the work of Yeung [2007. Dynamically consistent cooperative solution in a differential game of transboundary industrial pollution. Journal of Optimization Theory and Applications, 134, 143–160], our research significant features (i) introduce the emission permits trading into the transboundary industrial pollution control;(ii) take into account the pollution abatement investment; (iii) examine the incentive equilibrium strategies of transboundary industrial pollution control; and (iv) design an allocation mechanism for regions’ cooperative profits. Furthermore, we illustrate the results of the paper with a numerical example. The utility of this paper is how to make incentive equilibrium strategies in a situation where the neighboring regions facing transboundary industrial pollution under abatement investment and emission permits trading in a differential game setting.

Date: 2019
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DOI: 10.1080/23270012.2019.1595187

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