Global environment and dynamic games of environmental policy in an international duopoly

Akihiko Yanase

    Research output: Contribution to journalArticle

    17 Citations (Scopus)

    Abstract

    This paper examines a differential game model of international pollution control in which polluting oligopolists compete in a third country market. Two alternative policy instruments (emission taxes and command-and-control regulations) are considered. A tougher emission policy in the home country enhances the foreign firm's competitiveness because of the static "rent-shifting" effect. The foreign country also enjoys a future improvement of the global environmental quality by "free riding" on the home country's emission reduction effort. Because of these strategic effects, the levels of environmental policy determined in the noncooperative policy game are distorted away from the socially optimal level. Moreover, the emission tax game produces a more distortionary outcome than that in the command-and-control game; it generates more pollution and lower welfare.

    Original languageEnglish
    Pages (from-to)121-140
    Number of pages20
    JournalJournal of Economics/ Zeitschrift fur Nationalokonomie
    Volume97
    Issue number2
    DOIs
    Publication statusPublished - 2009 Jun 1

    Keywords

    • Differential game
    • Environmental policy
    • Global environment
    • International duopoly

    ASJC Scopus subject areas

    • Economics and Econometrics
    • Business, Management and Accounting(all)

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