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Investment in Cleaner Technologies in a Transboundary Pollution Dynamic Game: A Numerical Investigation

Author

Listed:
  • Javier Frutos

    (Universidad de Valladolid)

  • Víctor Gatón

    (Universidad de Valladolid)

  • Paula M. López-Pérez

    (Universidad de Valladolid)

  • Guiomar Martín-Herrán

    (Universidad de Valladolid)

Abstract

Within a noncooperative transboundary pollution dynamic game, we study the strategic impact of a region’s investment in the adoption of a cleaner technology, as embodied by a reduction in the emission per output ratio, on the equilibrium outcomes and regions’ welfare. The ratio of emissions to output is endogenous and is a decreasing function of the level of the stock of cleaner technology. Each region can invest in a cleaner technology in addition to its control of emissions. Cleaner technology is assumed to be public knowledge so that both regions benefit from the investment in this technology of an individual region. Pollution damage is modeled as a strictly convex function in the pollution stock. We analyze the feedback equilibrium of the noncooperative game between two regions played over an infinite horizon. The formulation of the transboundary pollution dynamic game does not fit any special structure of analytically tractable games such as linear-state or linear-quadratic differential games. We use numerical methods to characterize the feedback equilibrium of the noncooperative game. The equilibrium trajectories of the stocks of pollution and cleaner technology as well the regions’ welfare are compared under different scenarios.

Suggested Citation

  • Javier Frutos & Víctor Gatón & Paula M. López-Pérez & Guiomar Martín-Herrán, 2022. "Investment in Cleaner Technologies in a Transboundary Pollution Dynamic Game: A Numerical Investigation," Dynamic Games and Applications, Springer, vol. 12(3), pages 813-843, September.
    • Handle: RePEc:spr:dyngam:v:12:y:2022:i:3:d:10.1007_s13235-022-00445-z
    DOI: 10.1007/s13235-022-00445-z
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    References listed on IDEAS

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    Cited by:

    1. Hao Xu & Ming Luo, 2022. "Optimal Environmental Policy in a Dynamic Transboundary Pollution Game: Emission Standards, Taxes, and Permit Trading," Sustainability, MDPI, vol. 14(15), pages 1-25, July.
    2. Florian Wagener, 2022. "Dynamic Games in Environmental Economics and Management," Dynamic Games and Applications, Springer, vol. 12(3), pages 747-750, September.
    3. Yiwen Chen & Nora Paulus & Xi Wan & Benteng Zou, 2024. "To Deploy or Not to Deploy CCS Abatement, and When : A Differential Game Perspective," DEM Discussion Paper Series 24-07, Department of Economics at the University of Luxembourg.
    4. Fausto Gozzi & Marta Leocata & Giulia Pucci, 2024. "Network-Based Optimal Control of Pollution Growth," Papers 2406.15338, arXiv.org.
    5. Wenzhuo Sun & Zheng Liu, 2023. "Third-Party Governance of Groundwater Ammonia Nitrogen Pollution: An Evolutionary Game Analysis Considering Reward and Punishment Distribution Mechanism and Pollution Rights Trading Policy," Sustainability, MDPI, vol. 15(11), pages 1-16, June.

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