Journal
MATHEMATICS
Volume 9, Issue 16, Pages -Publisher
MDPI
DOI: 10.3390/math9161983
Keywords
game theory; corporate environmentalism; dynamic multi-objective duopoly; open-loop equilibrium; feedback Nash equilibrium
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This paper examines a discrete-time dynamic duopoly game with homogenous goods, finding that firms may invest differently under a feedback information structure compared to an open-loop one, and that capital stock is more sensitive to environmental appreciation in a feedback Nash equilibrium.
This paper studies a discrete-time dynamic duopoly game with homogenous goods. Both firms have to decide on investment where investment increases production capacity so that they are able to put a larger quantity on the market. The downside, however, is that a larger quantity raises pollution. The firms have multiple objectives in the sense that each one maximizes the discounted profit stream and appreciates a clean environment as well. We obtain some surprising results. First, where it is known from the continuous-time differential game literature that firms invest more under a feedback information structure compared to an open-loop one, we detect scenarios where the opposite holds. Second, in a feedback Nash equilibrium, capital stock is more sensitive to environmental appreciation than in the open-loop case.
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