Cobb-Douglas preferences and pollution in a bilateral oligopoly market
Bene Wende Anicet Kabre  1@  
1 : EconomiX  -  Website
UPL Université Paris Lumière Paris Nanterre
Université Paris Nanterre, 200 Avenue de la République, 92001 Nanterre Cedex, Bâtiment G, Bureau 209 -  France

In this note, we introduce pollution and examine its effects in a finite bilateral oligopoly model where agents have asymmetric Cobb-Douglas preferences. We define two strategic equilibria: the Stackelberg-Cournot equilibrium with pollution (SCEP) and the Cournot equilibrium with pollution (CEP). While the supplied quantities of the polluting and the non-polluting good depend on the preferences of all economic agents in the case of symmetric preferences, we show that when preferences are asymmetric, i) at both equilibria, each polluter's equilibrium supply depends only on the non-polluters' preferences for the non-polluting good; ii) at the CEP, the polluters' level of emissions is more sensitive to non-polluters preferences for the non-polluting good compared to their own preferences for this good; iii) at the SCEP, when polluters have higher preferences for the non-polluting good, the follower's level of emissions is more sensitive to polluters preferences compared to those of the non-polluters, whereas the leader's emissions level is more sensitive to non-polluters preferences.

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