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Optimal Incentive for Regulated Production

Benhao Du, Thomas Treillard and Francois Wang
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Benhao Du: Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres
Thomas Treillard: Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres
Francois Wang: Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres

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Abstract: This paper explores stochastic control models in the context of decarbonization within the energy market. We study three progressively complex scenarios: (1) a single firm operating with two technologies—one polluting and one clean,(2)two firms model and (3) two firms without any regulatory incentive. For each setting, we formulate the corresponding stochastic control problem and characterize the firms' optimal strategies in terms of investment and production. The analysis highlights the strategic interactions between firms and the role of incentives in accelerating the transition to cleaner technologies.

Keywords: Stochastic control in the energy market; HJB; PDE (search for similar items in EconPapers)
Date: 2025-06-08
Note: View the original document on HAL open archive server: https://hal.science/hal-05104169v2
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