1,721,262 research outputs found
On the interplay between resource extraction and polluting emissions in oligopoly
No full textThis chapter offers an overview of the literature discussing oligopoly games in which polluting emissions are generated by the supply of goods requiring a natural resource as an input. An analytical summary of the main features of the interplay between pollution and resource extraction is then given using a differential game based on the Cournot oligopoly model, in which (i) the bearings on resource preservation of Pigouvian tax rate tailored on emissions are singled out and (ii) the issue of the optimal number of firms in the commons is also addressed
Concentration and Innovation in the Defence Industry: A Stochastic Game
Full text linkThe relationship between industry structure, aggregate R&D activity and the quality level of the resulting innovation is investigated in a simple stochastic one-shot game in which all firms share the same probability of attaining the innovation concerning a new weapon system and therefore obtaining the contract from the government. The main findings of the game can be summarised as follows. Although only performing numerical calculations, the model predicts the existence of a concave and single-peaked relationship between aggregate R&D and industry structure, making it desirable to adjust concentration in order to reach that peak. However, the degree of concentration that maximises the final quality level of the innovation is higher than that maximises industry-wide R&D efforts, except in the special case in which technical knowledge freely spills over across firms, thanks to the creation of a research joint venture involving all firms
Regulating the tragedy of commons: Nonlinear feedback solutions of a differential game with a dual interpretation
Full text linkA well established dynamic model describing the impact of oligopolistic interaction on a renewable resource is revisited here to illustrate its dual interpretation as a waste removal differential game. The regulatory implications are illustrated by assuming that the public agency may control market price and possibly also access to the commons. Two different formulations of the managerial or CSR objective are envisaged, based on a combination of profits and either output or the individual share of the waste stock. It is shown that if the representative firm's objective includes the residual waste stock, there exists a unique regulated price driving to zero the steady state stock itself. Hence, the present analysis delivers some useful indications concerning an appropriate definition of the CSR objective firms should adopt
On the Coordination of Static and Dynamic Marketing Channels in a Duopoly with Advertising
No full textA leitmotiv of the analysis of marketing channels’ behaviour is the possibility of designing contractual relations so as to replicate the performance of vertically integrated firms, whenever this is efficient for firms. This is particularly relevant when the vertical externality provokes distortions in the firms’ incentives to invest in R&D or advertising. The present model illustrates the possibility of using two-part tariffs endogenously defined as linear functions of firms’ efforts to sterilize the vertical externality altogether in a duopoly where firms’ invest in advertising to increase brand equity. This is done first in a static model and then replicated in the differential game based upon the same building blocks
Individual and Firm Taxation in a CO₂ Emitting Economy
Full text linkTypical problems of negative effects of CO₂
emissions are that (i) they are suffered and generated not by the same agent and that (ii) individuals consider them as too small to influence the aggregated effect. Additionally, only little is known about how the behavior depends on the age-composition of a population and individual age-dependent life-cycle effects. We address these issues by an overlapping generations (OLG) structured population and a firm sector producing a homogeneous final consumption good. While firms generate CO₂
emission during the production process, individuals suffer from the aggregated effect. We analyze the difference between the decentralized market and the social welfare solution and study to which extent social optimality can be attained with different taxes on individual consumption and/or production. We find that firm taxation is always sufficient to reach the socially optimal level of CO₂
emissions. A social optimal distribution of consumption across cohorts, however, can only be attained by firm taxes in the steady state. In the general case, i.e., along a dynamic transitional path, additionally age-specific individual taxation is needed
On prices’ cyclical behaviour in oligopolistic markets
Full text linkWe revisit the discussion about the relationship between price's cyclical features, implicit collusion and the demand level in an oligopoly supergame where a positive shock may hit demand and disrupt collusion. The novel feature of our model consists in characterising the post-shock noncooperative price and comparing it against the cartel price played in the last period of the collusive path, to single out the conditions for procyclicality to arise both in the short and in the long-run. This poses an issue in terms of an antitrust agency's ability to draw well defined conclusions on the firms’ behaviour after the occurrence of the shock, with particular reference for the litigation phase after a cartel breakdown
Porter Hypothesis vs Pollution Haven Hypothesis: Can There Be Environmental Policies Getting Two Eggs in One Basket?
Full text linkThe Porter hypothesis and the pollution haven hypothesis seem to predict opposite reactions by firms facing environmental regulation, as the first invokes the arising of a win–win solution while the second envisages the possibility for firms to flee abroad. We illustrate the possibility of designing policies (taking the form of either emission taxation or environmental standards) able to eliminate firms’ incentives to relocate their plants abroad and create a parallel incentive for them to deliver a win–win solution by investing either in replacement technologies under emission taxation, or in abatement technologies under an environmental standard. This is worked out in a Cournot supergame in which firms may activate the highest level of collusion compatible with their intertemporal preferences
R&D investments with spillovers and endogenous horizontal differentiation
Full text linkWe investigate the implications of cost-reducing R&D activities with spillovers in a Hotelling model with endogenous product differentiation driven by quadratic transportation costs. We consider two different three-stage games: in the first, firms choose locations, then R&D efforts and finally prices; in the second, R&D strategies are decided at the first stage and locations are chosen at the second, with price competition taking place at the third. We identify the conditions whereby process innovation brings about a reduction of product differentiation in equilibrium, consequently implying lower profits. Equilibrium product differentiation and profits are increasing in R&D spillovers. Then, transforming the structure into a twofold version of a fourstage
game, we allow firms to commit not to invest in R&D, to show the presence of an underlying prisoners’ dilemma affecting R&D decisions. Finally, we illustrate R&D cartels’ ability to eliminate wasteful sunk costs,
and outline policy prescriptions
Incentives, performance and desirability of socially responsible firms in a Cournot oligopoly
No full textThis paper investigates how socially responsible behaviour influences firms' profits and social welfare when production entails an environmental externality. We study a Cournot oligopoly with pollution, with one CSR operating in the market. A CSR firm not only takes into account its profits but also internalises its own share of pollution and is sensitive to consumer surplus. With a large enough market, the CSR firm obtains higher profits than its profit-seeking competitors, and induces a higher level of social welfare. The results are confirmed when a socially optimal tax on pollution is adopted. Indeed, even if the environmental concern restrains the production of a CSR firm, the social concern expands it. The second effect more than offsets the first one in a large market, making the CSR production strategy be more aggressive compared to its competitors
- …
