Emissions abatement R&D Dynamic Competition in Supply Schedules

摘要: This paper investigates the optimal environmental policy (the mix of emissions tax and research development [R&D] subsidy) in a dynamic setting when two firms, producing differentiated products, compete output market over time. Firms differential game supply schedules, which encompasses continuum imperfect competition equilibria from Bertrand to Cournot. Although production generates environmentally damaging emissions, firms can undertake R&D that has sole purpose reducing emissions. In addition characterizing policy, we examine how subsidy, level abatement, change as intensifies, parameters change, investment abatement technology changes. this setting, increases welfare through its impact on final goods price. However, lower prices result larger quantities more pollution. Our key contribution is show increased depends extent nature preferences technology.