This paper considers efficient and monopolistic extraction of non-renewable (energy) resources when the resource consumption leads simultaneously to a stock externality (‘global warming’). The case of monopolistic supply leads to a dynamic game between cartelised producers and a consumers' government. For this game, we compute linear Markov perfect strategies that are characterized by preemption of the tax at the wellhead (when compared with the open loop solution). Unfortunately, the general, asymmetric two-state variable model does not allow for an explicit analytical solution. Therefore, a simplified version with one state variable (neglecting depreciation of the stock of the pollutant) is studied and a numerical example is presented. It turns out that the simplified and analytically solved framework provides a good approximation of the initial phase of the transient behaviour but not of the long run. Copyright Kluwer Academic Publishers 1995
This paper investigates a tragedy of the commons where an Ito-process traces the accumulation of pollution and differentiates between reversible (i.e., clean up is feasible) and irreversible emissions (past pollution cannot be undone). The reversible case allows for an explicit analytical solution, while other means are necessary to characterize irreversible outcomes. More precisely, a different characterization of equilibria (in Markov strategies) as smooth connections between an initial and a stopping manifold is suggested. Copyright 2008 Blackwell Publishing, Inc..
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.