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ABSTRACT
This paper investigates the effect caused by an increase in ambient charges on firm-specific and total pollutions in a Cournot oligopoly market. Formalising profit-maximising behaviour in the n-firm framework with product differentiation, we show the static result that ambient charge can reduce industrial pollution. We then demonstrate three dynamic results: the first that Cournot equilibrium can lose stability in the discrete-time framework if the number of the firms is greater than four, the second that it is always stable in the continuous-time framework and the third that stability can be switched to instability if a delay in production becomes large enough.
Acknowledgments
The authors greatly appreciate the useful comments and suggestions of an anonymous referee.
Disclosure statement
No potential conflict of interest was reported by the authors.
Notes
1. The goods are complements if −1 < γ < 0.
2. This section depends on Matsumoto and Szidarovszky (Citation2015b).
3. As seen in the discrete-time system (Equation10(10) ), the continuous-time system (Equation11
(11) ) and the delay system (Equation12
(12) ), the policy parameter θ does not appear in the homogenous part of each system. This implies that changing the policy parameter affect the equilibrium value, however, does not affect its stability.
4. We obtain the same result to be obtain if ω < 0 is assumed as complex roots are conjugate.
5. Substituting ω* into Equation (Equation17(17) ) and then solving it for τ give the same value in a different form.