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A differential game of R&D investment for pollution abatement in different market structures

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  • Yi, Yongxi
  • Xu, Rongwei
  • Zhang, Sheng

Abstract

This paper extends the recent work of Shibata from static perspective to dynamic perspective, presents a differential game model of pollution abatement R&D investment with emission tax. Two key factors to continuously measuring the intensity of market competition and pollution abatement R&D investment spillovers respectively are included in the model. Results show that before the termination point of the project, as the market becomes more competitive, noncooperative R&D investment is more likely to be preferred. There are cases in which, contrary to conventional wisdom, when the market is perfectly competitive, the cooperative pollution abatement R&D investment is zero but the noncooperative investment is not zero; the pollution abatement R&D investment spillovers have some positive influence on optimal cooperative R&D investment while make the optimal noncooperative R&D investment decrease.

Suggested Citation

  • Yi, Yongxi & Xu, Rongwei & Zhang, Sheng, 2019. "A differential game of R&D investment for pollution abatement in different market structures," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 524(C), pages 587-600.
    • Handle: RePEc:eee:phsmap:v:524:y:2019:i:c:p:587-600
    DOI: 10.1016/j.physa.2019.04.118
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