Pollution abatement and reservation prices in a market game

George Halkos and George Papageorgiou

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper we set up an oligopolistic market model, where firms invest in pollution abatement in order to increase the whole market size via an increase in the consumers’ reservation price. Moreover, we suppose that the demand function is not a linear one and the resulting game is not a usual linear quadratic one. In the considered model we investigate the open loop, the memory less closed-loop and the collusive patterns equilibrium. Additionally, we examine the social planning perspective. In the case of a convex demand we found the surprising result that the control and state variables have higher values in the open-loop steady state equilibrium than in the closed loop, while in a linear demand case the equilibrium is undetermined. In all cases we find that only if the market demand has concave curvature are the conclusions clear. A number of propositions and remarks are provided.

Keywords: Oligopoly Game; non-linear demand; pollution abatement; reservation price (search for similar items in EconPapers)
JEL-codes: C61 C62 D43 Q52 Q58 (search for similar items in EconPapers)
Date: 2012-10
New Economics Papers: this item is included in nep-bec, nep-ene and nep-env
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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