R&D for Green Technologies in a Dynamic Oligopoly: Schumpeter, Arrow and Inverted-U's

Quaderni - Working Paper DSE N° 929

28 Pages Posted: 11 Mar 2014

See all articles by Gustav Feichtinger

Gustav Feichtinger

Vienna University of Technology - Institute for Econometrics, Operations Research and Systems Theory

Luca Lambertini

University of Bologna - Department of Economics

George Leitmann

University of California, Berkeley - College of Engineering

Stefan Wrzaczek

Vienna University of Technology

Date Written: March 5, 2014

Abstract

We extend a well known differential oligopoly game to encompass the possibility for production to generate a negative environmental externality, regulated through Pigouvian taxation and price caps. We show that, if the price cap is set so as to fix the tolerable maximum amount of emissions, the resulting equilibrium investment in green R&D is indeed concave in the structure of the industry. Our analysis appears to indicate that inverted-U-shaped investment curves are generated by regulatory measures instead of being a "natural" feature of firms’ decisions.

Keywords: dynamic games, oligopoly, environmental externality, R&D

JEL Classification: C73, L13, O31

Suggested Citation

Feichtinger, Gustav and Lambertini, Luca and Leitmann, George and Wrzaczek, Stefan, R&D for Green Technologies in a Dynamic Oligopoly: Schumpeter, Arrow and Inverted-U's (March 5, 2014). Quaderni - Working Paper DSE N° 929, Available at SSRN: https://ssrn.com/abstract=2406874 or http://dx.doi.org/10.2139/ssrn.2406874

Gustav Feichtinger (Contact Author)

Vienna University of Technology - Institute for Econometrics, Operations Research and Systems Theory ( email )

Argentinierstrasse 8
A-1040 Vienna
Austria
+43-1-58801 ext. 11927 (Phone)
+43-1-5054524 (Fax)

Luca Lambertini

University of Bologna - Department of Economics ( email )

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

George Leitmann

University of California, Berkeley - College of Engineering ( email )

Berkeley, CA 94720-1712
United States

Stefan Wrzaczek

Vienna University of Technology ( email )

Karlsplatz 13
Vienna
Austria

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