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Market Power, Resource Extraction and Pollution: Some Paradoxes and a Unified ViewLuca LambertiniUniversity of Bologna - Department of Economics George LeitmannUniversity of California, Berkeley - College of Engineering November 29, 2011 Quaderni DSE Working Paper No. 798 Abstract: We adopt a stepwise approach to the analysis of a dynamic oligopoly game in which production makes use of a natural resource and pollutes the environment, starting with simple models where Â…firms' output is not a function of the natural resource to end up with a full-fledged model in which (i) the resource is explicitly considered as an input of production and (ii) the natural resource and pollution interact via the respective state equations. This allows us to show that the relationship between the welfare properties of the economic system and the intensity of competition is sensitive to the degree of accuracy with which the model is constructed.
Number of Pages in PDF File: 25 Keywords: environmental externality, resource extraction, oligopoly, Pigouvian taxation, R&D JEL Classification: C73, H23, L13, O31, Q2, Q3 working papers seriesDate posted: November 29, 2011Suggested CitationContact Information
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