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Environmental Policies and Firm Behavior with Endogenous Investment in R & D

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DOI: 10.4236/ti.2010.12009    3,403 Downloads   6,084 Views  

ABSTRACT

This paper investigates upon the optimal amount of oil usage in an economy characterized by competitive firms and by a monopolistic innovator. It is close in spirit to Denicolo 1999 and Parry 2003. There are two alternative oil saving technologies: the conventional one is promptly available to firms while the advanced one, providing more efficiency in oil saving, must be paid to the monopolistic innovator. By assuming that innovation follows a Poisson process, whose arrival rate depends on the amount of resources invested in R & D, we show that central authority provides higher level of social welfare than market instruments.

Conflicts of Interest

The authors declare no conflicts of interest.

Cite this paper

E. Gaeta, "Environmental Policies and Firm Behavior with Endogenous Investment in R & D," Technology and Investment, Vol. 1 No. 2, 2010, pp. 77-84. doi: 10.4236/ti.2010.12009.

References

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