Environmental Regulation of Multiple Pollutants： Simultaneous-move vs. Sequential-move Games
Date Issued
2014
Date
2014
Author(s)
Cheng, Li-Ling
Abstract
This thesis assumes that a single firm generates two kinds of pollutants during the process of manufacturing and the regulation of two pollutants is responsibly controlled by two independent governmental sectors or departments. In real life, an example is the emission of sulfur dioxide (SO2) and carbon dioxide (CO2) of a factory during the production process. While the responsible units set such volume to the upper limit for the two pollutants, they devote themselves to maximize social welfare. Under the assumption that the controlling policy bearing legal force, the manufacturers would make their final discharge of pollutants to comply with the norms. Judging from the governmental authorities responsible for controlling the emission of pollutants, two types of regulations may be applied to. One which regulates both pollutants at an identity is called ""centralized regulation"" while the other at two different entities is called ""compartmentalized regulation."" Generally speaking, while the discharge of pollutants are controlled by a governmental authority, the results bear efficiency. This thesis mainly explores whether or not the efficiency similarly exists in the results of the emission of pollutants performed by compartmentalized regulation and centralized regulation. The paper further analyzes whether or not a deviation exists in the results performed under the simultaneous-move Nash regulation game and the sequential-move Stackelberg regulation game. After reviewing each paragraph in this thesis, the results show while the firm cost functions and pollution damage functions are both separable, under the assumption that market mechanism bears efficiency, the equilibrium under the compartmentalized regulation are the same as the centralized one. However, while the firm cost functions and pollution damage functions are inseparable, the results bear inefficiency under compartmentalized regulation.
Subjects
centralized regulation
compartmentalized regulation
separable function
simultaneous-move Nash game
sequential-move Stackelberg game
Type
thesis