Being Green First: Simultaneous vs. Sequential Abatement Decisions

8 Pages Posted: 6 Mar 2023

See all articles by John Strandholm

John Strandholm

University of South Carolina Upstate

Ana Espinola-Arredondo

Washington State University

Felix Munoz-Garcia

Washington State University - School of Economic Sciences

Abstract

We investigate the effect of the timing of green technology investment in a polluting duopoly facing environmental regulation. We consider a three-stage game where (i) firms sequentially choose their investment in the first stage, (ii) the regulator sets the optimal emission fee in the second stage, and (iii) the polluting good is produced in the third stage. When free-riding incentives are strong the leader enjoys a first-mover advantage, investing less in abatement than the follower, as in sequential public good games.  We also show that sequential investment decisions achieve higher abatement than simultaneous decisions, and identify in which settings such a difference is the largest.

Keywords: green technology, Sequential investment, Abatement, Emission fees, Free-riding incentives.

Suggested Citation

Strandholm, John and Espinola-Arredondo, Ana and Munoz-Garcia, Felix, Being Green First: Simultaneous vs. Sequential Abatement Decisions. Available at SSRN: https://ssrn.com/abstract=4379905 or http://dx.doi.org/10.2139/ssrn.4379905

John Strandholm

University of South Carolina Upstate ( email )

800 University Way
Spartanburg, SC 29303
United States

Ana Espinola-Arredondo (Contact Author)

Washington State University ( email )

Wilson Rd.
College of Business
Pullman, WA 99164
United States

Felix Munoz-Garcia

Washington State University - School of Economic Sciences ( email )

P.O. Box 646210
Hulbert Hall 101
Pullman, WA 99164-6210
United States

HOME PAGE: http://www.ses.wsu.edu/People/munoz.htm

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