Abstract
This paper analyzes a dynamic model of the firm. We focus on the effect of investment in green energy. We explicitly take into account that green energy has a positive side effect, namely that it contributes to the goodwill of the firm and thus increases demand. Different models are proposed and the solutions range from monotonic saddle point convergence to history-dependent Skiba behavior.
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Notes
- 1.
In the following analysis we will implicitly assume that the price is positive and drop the maximum operator in the inverse demand. We have checked that along optimal paths we consider in the numerical analysis this assumption is indeed correct.
- 2.
There exists also a steady state of the state/co-state dynamics with K ∗ > 0 and X ∗ < 0. However for this steady state \(\det J < 0\) and it is not saddle point stable.
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The authors are grateful for helpful comments from two anonymous referees.
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Dawid, H., Hartl, R.F., Kort, P.M. (2020). Dynamic Models of the Firm with Green Energy and Goodwill with a Constant Size of the Output Market. In: Pineau, PO., Sigué, S., Taboubi, S. (eds) Games in Management Science. International Series in Operations Research & Management Science, vol 280. Springer, Cham. https://doi.org/10.1007/978-3-030-19107-8_8
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