Abatement technology innovation modelling with spillover effects under different market structures

Abstract

<p style='text-indent:20px;'>In this paper, a firm's research and development (R & D) investments for abatement technology innovation is modeled as a non-cooperative two-stage game. Parameters are introduced to simulate the spillover effects and market structure. Our advanced analysis together with numerical experiments reveals that (i) as the market structure becomes more competitive, the firm's investments for abatement technology innovation under non-cooperative setting is more likely to be preferred to the investments for abatement technology innovation under cooperative setting; (ii) for a given emission tax, the firm's investments for abatement technology innovation increase with the increase of the spillovers, while the investments for abatement technology innovation decrease with the increase of the competition intensity; (iii) for a given emission tax, the optimal solution of the firm's investments for abatement technology innovation is stable for both non-cooperative and cooperative cases.</p>