Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/159587
Authors: 
Fadaee, Mehdi
Year of Publication: 
2011
Series/Report no.: 
Quaderni - Working Paper DSE 746
Abstract: 
In this paper, we develop a two-country world differential game model with a polluting firm in each country where there is transportation cost to investigate the equilibrium of the game between firms when they decide to trade or not and to see under which conditions social welfare coincides with the market equilibrium. We find out that in the static game bilateral trade is always the equilibrium for any acceptable transportation cost while in the dynamic game social planner can prevent the inefficient outcome by imposing and determining the proper amount of Pigouvian taxation.
JEL: 
C73
F18
H23
Q56
Persistent Identifier of the first edition: 
Creative Commons License: 
https://creativecommons.org/licenses/by-nc/3.0/
Document Type: 
Working Paper

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