Document Type

Article

Journal/Book Title/Conference

Economics Research Institute Study Paper

Volume

96

Issue

4

Publisher

Utah State University Department of Economics

Publication Date

1996

Rights

Copyright for this work is held by the author. Transmission or reproduction of materials protected by copyright beyond that allowed by fair use requires the written permission of the copyright owners. Works not in the public domain cannot be commercially exploited without permission of the copyright owner. Responsibility for any use rests exclusively with the user. For more information contact the Institutional Repository Librarian at digitalcommons@usu.edu.

First Page

1

Last Page

27

Abstract

This paper continues a line of research begun in Batabyal ("Consistency and Optimality in a Dynamic Game of Pollution Control I: Competition," ERI Study Paper #95-29). I model the interaction between a regulator and a monopolistic, polluting firm as a Stackelberg differential game in which the regulator leads. The firm creates pollution, which results in a stock externality. I analyze the intertemporal effects of alternative pollution control measures. The principal issue here concerns the dynamic inconsistency of the optimal solution. Inter alia, I compare the steady state levels of pollution under optimal and under dynamically consistent policies.

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