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

DYNAMIC SYSTEMS, ECONOMIC GROWTH AND THE ENVIRONMENT, Springer 2010

10 Pages Posted: 22 Jul 2009

See all articles by Davide Dragone

Davide Dragone

University of Bologna - Department of Economics

Luca Lambertini

University of Bologna - Department of Economics

Arsen Palestini

University of Bologna - Department of Economics

Date Written: December 16, 2008

Abstract

We model the interplay between capital accumulation for production and environmental externalities in a differential oligopoly game with Ramsey dynamics. The external effect is determined, alternatively, by sales or production. While the externality does not affect the behaviour of profit-seeking firms, it may induce a benevolent planner to shrink sales as compared to the Cournot-Nash equilibrium because of a tradeoff between consumer surplus and the externality, if the latter is driven by sales. If instead it is determined by production, there emeges that the Ramsey golden rule is no longer socially optimal.

Suggested Citation

Dragone, Davide and Lambertini, Luca and Palestini, Arsen, The Incentive to Invest in Environmental-Friendly Technologies: Dynamics Makes a Difference (December 16, 2008). DYNAMIC SYSTEMS, ECONOMIC GROWTH AND THE ENVIRONMENT, Springer 2010, Available at SSRN: https://ssrn.com/abstract=1436400

Davide Dragone (Contact Author)

University of Bologna - Department of Economics ( email )

Piazza Scaravilli 2
Bologna, 40126
Italy
0039.051.2098880 (Phone)

HOME PAGE: http://https://www.unibo.it/sitoweb/davide.dragone/en

Luca Lambertini

University of Bologna - Department of Economics ( email )

Strada Maggiore 45
Bologna, 40125
Italy
+39 051 2092600 (Phone)
+39 051 2092664 (Fax)

Arsen Palestini

University of Bologna - Department of Economics ( email )

Strada Maggiore 45
Bologna, 40125
Italy

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