D. Dragone, L. Lambertini, G. Leitmann, A. Palestini
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A Stochastic Optimal Control Model of Pollution Abatement
We model a dynamic monopoly with environmental externalities,investigating the adoption of a tax levied on the firm's instantaneous contribution to the accumulation of pollution. The latter process is subject to a shock, which is i.i.d. across instants. We prove the existence of an optimal tax rate such that the monopoly replicates the same steady state welfare level as under social planning. Yet, the corresponding output level, R&D investment for environmental friendly technologies and surplus distribution necessarily differ from the socially optimal ones.
期刊介绍:
Nonlinear Dynamics and Systems Theory is an international journal published quarterly. The journal publishes papers in all aspects of nonlinear dynamics and systems theory according to its scope. The object of the journal is to promote collaboration in the world community and to develop the contemporary nonlinear dynamics and systems theory.