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Dynamic Oligopoly with Capital Accumulation and Environmental Externality

In: Dynamic Systems, Economic Growth, and the Environment

Author

Listed:
  • Davide Dragone

    (University of Bologna)

  • Luca Lambertini

    (University of Bologna)

  • Arsen Palestini

    (University of Bologna)

Abstract

We model the interplay between capital accumulation for production and environmental externalities in a differential oligopoly game with Ramsey dynamics. The external effect is determined, alternatively, by sales or production. While the externality does not affect the behaviour of profit-seeking firms, it may induce a benevolent planner to shrink sales as compared to the Cournot-Nash equilibrium because of a tradeoff between consumer surplus and the externality, if the latter is driven by sales. If instead it is determined by production, there emerges that the Ramsey golden rule is no longer socially optimal.

Suggested Citation

  • Davide Dragone & Luca Lambertini & Arsen Palestini, 2010. "Dynamic Oligopoly with Capital Accumulation and Environmental Externality," Dynamic Modeling and Econometrics in Economics and Finance, in: Jesús Crespo Cuaresma & Tapio Palokangas & Alexander Tarasyev (ed.), Dynamic Systems, Economic Growth, and the Environment, pages 197-214, Springer.
    • Handle: RePEc:spr:dymchp:978-3-642-02132-9_10
    DOI: 10.1007/978-3-642-02132-9_10
    as

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