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N-firm oligopolies with pollution control and random profits

Author

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  • Akio Matsumoto

    (Chuo University)

  • Ferenc Szidarovszky

    (Corvinus University)

Abstract

An n-firm oligopoly is introduced in which, in addition to production levels, the pollution emissions are also included. A regulator cannot monitor individual emission volumes of firms, so uniform incentives are introduced to firms to reduce pollution concentrations. The regulator cannot observe the exact concentrations, so the incentives are also uncertain. Therefore, each firm considers random profit with expectations that it is maximized by minimizing variances or standard deviations. This idea leads to a multi-objective optimization problem for each firm, so two different concepts are applied as a solution. The unique positive Nash equilibrium is proven in all cases examined, and the effects of the environmental tax rate on industry output, prices, and pollution emission levels are analyzed.

Suggested Citation

  • Akio Matsumoto & Ferenc Szidarovszky, 2022. "N-firm oligopolies with pollution control and random profits," Asia-Pacific Journal of Regional Science, Springer, vol. 6(3), pages 1017-1039, October.
    • Handle: RePEc:spr:apjors:v:6:y:2022:i:3:d:10.1007_s41685-022-00246-7
    DOI: 10.1007/s41685-022-00246-7
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    References listed on IDEAS

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    1. Szidarovszky, Ferenc & Okuguchi, Koji, 1997. "On the Existence and Uniqueness of Pure Nash Equilibrium in Rent-Seeking Games," Games and Economic Behavior, Elsevier, vol. 18(1), pages 135-140, January.
    2. Akio Matsumoto & Ferenc Szidarovszky, 2021. "Controlling non-point source pollution in Cournot oligopolies with hyperbolic demand," SN Business & Economics, Springer, vol. 1(2), pages 1-15, February.
    3. Adriana Gama, 2020. "Standards and social welfare in Cournot oligopolies," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 22(3), pages 467-483, July.
    4. Segerson, Kathleen, 1988. "Uncertainty and incentives for nonpoint pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 15(1), pages 87-98, March.
    5. Toshiharu Ishikawa & Akio Matsumoto & Ferenc Szidarovszky, 2019. "Regulation of non-point source pollution under n-firm Bertrand competition," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 21(4), pages 579-597, October.
    6. Shoji Haruna & Rajeev K. Goel, 2019. "Optimal pollution control in a mixed oligopoly with research spillovers," Australian Economic Papers, Wiley Blackwell, vol. 58(1), pages 21-40, March.
    7. Amagoia Sagasta & José M. Usategui, 2018. "Time Structure of Emissions and Comparison Between the Optimal Emission Taxes Under Selling and Under Renting in Durable Goods Oligopolies," Manchester School, University of Manchester, vol. 86(1), pages 52-75, January.
    8. Akio Matsumoto & Ferenc Szidarovszky & Masahiro Yabuta, 2018. "Environmental effects of ambient charge in cournot oligopoly," Journal of Environmental Economics and Policy, Taylor & Francis Journals, vol. 7(1), pages 41-56, January.
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    Cited by:

    1. Ahmad Naimzada & Marina Pireddu, 2023. "Differentiated goods in a dynamic Cournot duopoly with emission charges on output," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 46(1), pages 305-318, June.
    2. Ahmad Naimzada & Marina Pireddu, 2023. "Dynamic approaches for the evaluation of the environmental policy efficacy in a nonlinear Cournot duopoly with differentiated goods and emission charges," Working Papers 517, University of Milano-Bicocca, Department of Economics.

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