International Society of Dynamic Games

Dynamic Games and Applications Seminar

Environmental Regulation under Sequential Competition

November 30, 2023, 11:00 AM — 12:00 PM (Montreal time)

Webinar link

We examine a polluting industry, competing à la Stackelberg, where an emission fee is sequentially set on the leader and the follower. We evaluate the leader’s output advantage, disentangling two effects: the first-mover and cost advantage. We show that environmental regulation decreases the leader’s output advantage, which is positive when firms are asymmetric. We also measure the output inefficiency if the regulator incorrectly assumes the industry competes simultaneously, identifying in which settings this inefficiency is the largest. Our extensions allow for inflexible emission fees, several leaders and followers, product differentiation, and for the follower to hold a cost advantage.

Dynamic Games and Applications Seminar

Climate policy under political pressure

November 23, 11:00 AM — 12:00 PM (Montreal time)

Webinar link

We propose a theoretical framework to study the implications of political pressure on optimal climate policy. A key feature of the framework is its ability to capture dynamic inconsistency, which naturally arises from the long time horizon of climate policies and their susceptibility to modifications due to political pressure. Our findings offer a new rationale for why green lobbying can make pollution regulation less stringent. We also show that political pressure from the polluting sector leads to a higher rate of clean energy investment chosen by the government and can facilitate the transition from dirty to clean technologies. (with Andrei Kalk)