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Environmental Policies and Firm Behavior with Endogenous Investment in R & D
University of Rome “Tor Vergata”, Rome, Italy
- 1 University of Rome “Tor Vergata”, Rome, Italy
Technology and Investment·Volume 01 (2010)·Pages 77–84·Published 25 May 2010·DOI10.4236/ti.2010.12009
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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.
KeywordsEnvironmental PoliciesTechnological ChangeEnergy SavingWelfare Analysis
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