ENVIRONMENTAL INNOVATION, WAR OF ATTRITION AND INVESTMENT GRANTS

Cesare Dosi () and Michele Moretto
Additional contact information
Cesare Dosi: Department of Economics, University of Padova, via del santo 33, 35100 Padova, Italy

International Game Theory Review (IGTR), 2010, vol. 12, issue 01, 37-59

Abstract: The paper analyses the timing of spontaneous environmental innovation when second-mover advantages, arising from the expectation of declining investment costs, increase the option value of waiting created by investment irreversibility and uncertainty about private payoffs. We then focus on the design of public subsidies aimed at bridging the gap between the spontaneous time of technological change and the socially desirable one. Under network externalities and incomplete information about firms' switching costs, auctioning investment grants appears to be a cost-effective way of accelerating pollution abatement, in that it allows targeting grants instead of subsidizing the entire industry indiscriminately.

Keywords: Environmental innovation; investment irreversibility; network externalities; investment grants; second-price auction; Q28; O38 (search for similar items in EconPapers)
JEL-codes: B4 C0 C6 C7 D5 D7 M2 (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S0219198910002507
Access to full text is restricted to subscribers

Related works:
Working Paper: Environmental Innovation, War of Attrition and Investment Grants (2007)
Working Paper: Environmental Innovation, War of Attrition and Investment Grants (2004)
Working Paper: Environmental Innovation, War of Attrition and Investment Grants
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:wsi:igtrxx:v:12:y:2010:i:01:n:s0219198910002507

Ordering information: This journal article can be ordered from

DOI: 10.1142/S0219198910002507

Access Statistics for this article

International Game Theory Review (IGTR) is currently edited by David W K Yeung

More articles in International Game Theory Review (IGTR) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().