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Investment in Green Technology and Entry Deterrence

Author

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  • Strandholm John C.

    (Johnson College of Business and Economics, University of South Carolina Upstate, 160 East St John St, Spartanburg, SC 29306, USA)

  • Espínola-Arredondo Ana

    (School of Economic Sciences, Washington State University, 111C Hulbert Hall, Pullman, WA 99164, USA)

Abstract

This paper analyzes an entry-deterrence model in which the incumbent decides whether to invest in research and development (R&D) that promotes clean technology. We consider the case in which the entrant could benefit from a technology spillover and analyze the conditions that facilitate the incumbent’s entry-deterrence behavior. We show that higher levels of the spillover make entry more attractive compared to a standard entry game. In addition, regulator and incumbent prefer entry when the spillover from clean technology is sufficiently high and the cost of investing in R&D is relatively low. However, preferences are misaligned when the spillover and cost of R&D are low.

Suggested Citation

  • Strandholm John C. & Espínola-Arredondo Ana, 2020. "Investment in Green Technology and Entry Deterrence," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 20(2), pages 1-18, April.
    • Handle: RePEc:bpj:bejeap:v:20:y:2020:i:2:p:18:n:1
    DOI: 10.1515/bejeap-2018-0355
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    1. Strandholm, John C. & Espínola-Arredondo, Ana & Munoz-Garcia, Felix, 2018. "Regulation, free-riding incentives, and investment in R&D with spillovers," Resource and Energy Economics, Elsevier, vol. 53(C), pages 133-146.
    2. Ana Espínola‐Arredondo & Félix Muñoz‐Garcia & Jude Bayham, 2014. "The Entry‐Deterring Effects of Inflexible Regulation," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 47(1), pages 298-324, February.
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    Citations

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    Cited by:

    1. Manman Wang & Shuai Lian & Shi Yin & Hengmin Dong, 2020. "A Three-Player Game Model for Promoting the Diffusion of Green Technology in Manufacturing Enterprises from the Perspective of Supply and Demand," Mathematics, MDPI, vol. 8(9), pages 1-26, September.
    2. Strandholm, John C. & Espinola-Arredondo, Ana & Munoz-Garcia, Felix, 2021. "Pollution abatement with disruptive R&D investment," Resource and Energy Economics, Elsevier, vol. 66(C).
    3. John C. Strandholm, 2020. "Promotion of Green Technology under Different Environmental Policies," Games, MDPI, vol. 11(3), pages 1-23, August.

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    More about this item

    Keywords

    entry deterrence; emission fee; research and development; spillover;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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