A Dynamic Game on Renewable Natural Resource Exploitation

This paper studies oligopolistic firms’ exploitation of a renewable natural resource in a differential game. It is well known that finding Markov perfect equilibrium in differential games is extremely difficult except for games that are linear-quadratic. In this paper, we develop a differential game model that is not linear-quadratic and derive Markov perfect equilibrium for the game. One salient feature of the model is that consumers are concerned with the stock of the natural resource in that consumers’ demand for harvest of the natural resource depends upon the level of the stock of the natural resource. We also examine the effects of taxation on equilibrium. Moreover, we discuss open-loop equilibrium for the games under both cooperative and noncooperative exploitation of the natural resourceRenewable natural resource, oligopoly, differential game

Impact of risk aversion and countervailing tax in oligopoly

Kobayashi’s work was partially supported by JSPS KAKENHI Grant Number JP15K03462.The literature recognizes the qualitative effects of risk aversion on oligopolistic market performance, but less is known about their magnitudes. We quantitatively evaluate these effects in Cournot and Bertrand oligopolies where firms maximize mean-variance utilities under linear demand and costs. The impacts are very similar for the two types of oligopoly, but have opposite signs. The impacts of a firm’s risk aversion on outputs, prices, consumer surplus and social welfare can be expressed via potentially observable variables. Since these impacts resemble the effects of firms’ cost changes, a regulator can reduce or eliminate undesirable effects of risk aversion by changing firms’ costs with appropriate countervailing taxes.Publisher PDFPeer reviewe

Monopoly profit lower than oligopoly due to risk aversion

The industry profit is usually maximized under monopoly and falls with the number of firms in a Cournot oligopoly. However, demand uncertainty and risk aversion reduce firms' outputs, thus raising oligopoly profits and reducing monopoly one. Given a liner demand and costs and a mean-variance utility, we obtain the necessary and sufficient condition for a monopoly's profit and utility to be lower than an oligopoly. We also find such a condition for collusion to yield a lower profit. Finally, we provide a sufficient condition for a monopoly profit to be lower than an oligopoly given a general non-linear demand function.Peer reviewe

Equal tax and equal compensation : a fair and efficient way to save climate

We show that “equal tax and equal compensation” (T&C) is fair as justified by the two fairness principles. It differs from any Pigouvian tax with fixed lump-sum payments and can motivate every country to maximize world welfare. It benefits countries with current per capita emissions lower than the world average and would benefit every country when compared with a fair benchmark where emissions are duly penalized and compensated. Subsidizing emission reduction by poll tax is Pareto efficient and Pareto improving over status quo, but unfair. An imperfect T&C with a sub-optimal tax or pyramid taxes can still benefit the world.Peer reviewe

Sustainable Living with Environmental Risks

Earth System Sciences; Environmental Management; Sustainable Development; Environmental Risk Management; Sustainable Society; Biodiversity and Environment; Interdisciplinary Science; Leadership Education; Sustainable Living with Environmental Risks (SLER