Abstract
We model the interplay between capital accumulation for production and environmental externalities in a differential oligopoly game with Ramsey dynamics. The external effect is determined, alternatively, by sales or production. While the externality does not affect the behaviour of profit-seeking firms, it may induce a benevolent planner to shrink sales as compared to the Cournot-Nash equilibrium because of a tradeoff between consumer surplus and the externality, if the latter is driven by sales. If instead it is determined by production, there emerges that the Ramsey golden rule is no longer socially optimal.
We thank Thierry Brechet, Tapio Palokangas, Chihiro Watanabe, an anonymous referee and the audience at the ECG Symposium at IIASA (Laxenburg, November 7–8, 2008) for helpful comments and suggestions. The usual disclaimer applies.
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Dragone, D., Lambertini, L., Palestini, A. (2010). Dynamic Oligopoly with Capital Accumulation and Environmental Externality. In: Crespo Cuaresma, J., Palokangas, T., Tarasyev, A. (eds) Dynamic Systems, Economic Growth, and the Environment. Dynamic Modeling and Econometrics in Economics and Finance, vol 12. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-02132-9_10
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DOI: https://doi.org/10.1007/978-3-642-02132-9_10
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