Climate Change Adaptation under Heterogeneous Beliefs

Marcel Nutz and Florian Stebegg

Papers from arXiv.org

Abstract: We study strategic interactions between firms with heterogeneous beliefs about future climate impacts. To that end, we propose a Cournot-type equilibrium model where firms choose mitigation efforts and production quantities such as to maximize the expected profits under their subjective beliefs. It is shown that optimal mitigation efforts are increased by the presence of uncertainty and act as substitutes; i.e., one firm's lack of mitigation incentivizes others to act more decidedly, and vice versa.

Date: 2021-01, Revised 2022-02
New Economics Papers: this item is included in nep-env and nep-gth
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2101.08424

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