Collusion Helps Abate Environmental Pollution: A Dynamic Approach

Lambertini, Luca ; Mantovani, Andrea (2007) Collusion Helps Abate Environmental Pollution: A Dynamic Approach. Bologna: Dipartimento di Scienze economiche DSE, p. 12. DOI 10.6092/unibo/amsacta/4635. In: Quaderni - Working Paper DSE (615). ISSN 2282-6483.
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Abstract

We investigate the bearings product market collusion on the abatement of polluting emissions in a Cournot oligopoly where production entails a negative environmental externality. We model the problem as a differential game and investigate the feedback solution of two alternative settings: a fully noncooperative oligopoly and a cartel maximising the discounted profits of all firms in the industry. Our analysis proves that the output reduction entailed by collusive behaviour may have a benefiacial effect on steady state welfare, as a result of the balance between a higher market price and a lower amount of polluting emissions. This result opens a new prespective on the debate about the management of environmental externalities, which so far has mainly focussed on the design of Pigouvian taxation schemes.

Abstract
Document type
Monograph (Working Paper)
Creators
CreatorsAffiliationORCID
Lambertini, Luca
Mantovani, Andrea
Keywords
collusion, environmental externality, pollution
Subjects
ISSN
2282-6483
DOI
Deposit date
16 Feb 2016 15:05
Last modified
16 Feb 2016 15:05
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