The Incentive to Invest in Environmental-Friendly Technologies: Dynamics Makes a Difference

Davide Dragone, Luca Lambertini () and Arsen Palestini ()

Working Papers from Dipartimento Scienze Economiche, Universita' di Bologna

Abstract: The established view on oligopolistic competition with environmental externalities has it that, since firms neglect the external effect, their incentive to invest in R&D for pollution abatement is nil unless they are subject to some form of environmental taxation. We take a dynamic approach to this issue, using a simple differential game to show that the conclusion reached by the static literature is not robust, as the introduction of dynamics shows that firms do invest in R&D for environmental-friendly technologies throughout the game. Moreover, our setup also illustrates the existence of multiple equilibria, only one of which is identified by the corresponding static game.

Date: 2009-03
New Economics Papers: this item is included in nep-env
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Citations: View citations in EconPapers (2)

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Related works:
Chapter: The Incentive to Invest in Environmental-Friendly Technologies: Dynamics Makes a Difference (2013)
Working Paper: The Incentive to Invest in Environmental-Friendly Technologies: Dynamics Makes a Difference (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:bol:bodewp:658

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