Climate Change Adaptation under Heterogeneous Beliefs

28 Pages Posted: 12 Mar 2021

See all articles by Marcel Nutz

Marcel Nutz

Columbia University

Florian Stebegg

Columbia University

Date Written: January 20, 2021

Abstract

We study strategic interactions between firms with heterogeneous beliefs about future climate impacts. To that end, we propose a Cournot-type equilibrium model where firms choose mitigation efforts and production quantities such as to maximize the expected profits under their subjective beliefs. It is shown that optimal mitigation efforts are increased by the presence of uncertainty and act as substitutes; i.e., one firm's lack of mitigation incentivizes others to act more decidedly, and vice versa

Keywords: Climate Change Adaptation, Heterogeneous Beliefs, Cournot Equilibrium

JEL Classification: Q54, C72

Suggested Citation

Nutz, Marcel and Stebegg, Florian, Climate Change Adaptation under Heterogeneous Beliefs (January 20, 2021). Available at SSRN: https://ssrn.com/abstract=3770442 or http://dx.doi.org/10.2139/ssrn.3770442

Marcel Nutz (Contact Author)

Columbia University ( email )

Florian Stebegg

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States

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