Consistency and optimality in a dynamic game of pollution control I: Competition |
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Authors: | Amitrajeet A Batabyal |
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Institution: | (1) Department of Economics, Utah State University, 84322-3530 Logan, UT, USA |
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Abstract: | I model the interaction between a regulator and polluting firms as a Stackelberg differential game in which the regulator leads. The firms create pollution, which results in a stock extermality. I analyze the intertemporal effects of alternate pollution control measures in a competitive industry. The principal issue here concerns the dynamic inconsistency of the optimal solution. Inter alia, I compare the steady state levels of pollution under optimal and under time consistent policies. |
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Keywords: | environmental economics regulation tax dynamic game |
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