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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    3,648 Downloads   6,444 Views  


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.

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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.


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