A differential game of R&D investment for pollution abatement in different market structures

This paper extends the recent work of Shibata from static perspective to dynamic perspective, presents a differential game model of pollution abatement R&D investment with emission tax. Two key factors to continuously measuring the intensity of market competition and pollution abatement R&D investment spillovers respectively are included in the model. Results show that before the termination point of the project, as the market becomes more competitive, noncooperative R&D investment is more likely to be preferred. There are cases in which, contrary to conventional wisdom, when the market is perfectly competitive, the cooperative pollution abatement R&D investment is zero but the noncooperative investment is not zero; the pollution abatement R&D investment spillovers have some positive influence on optimal cooperative R&D investment while make the optimal noncooperative R&D investment decrease. (C) 2019 Elsevier B.V. All rights reserved.