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A dynamic theory of spatial externalities

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  • NSTL
  • Elsevier
We characterize the shape of spatial externalities in a continuous time and space differential game with transboundary pollution. We posit a realistic spatiotemporal law of motion for pollution (diffusion and advection), and tackle spatiotemporal non-cooperative (and cooperative) differential games. Precisely, we consider a circle partitioned into several states where a local authority decides autonomously about its investment, production and depollution strategies over time knowing that investment/production generates pollution, and pollution is transboundary. The time horizon is infinite. We allow for a rich set of geographic heterogeneities across states. We solve analytically the induced non-cooperative differential game and characterize its long-term spatial distributions. In particular, we prove that there exist a Perfect Markov Equilibrium, unique among the class of the affine feedbacks. We further provide with a full exploration of the free riding problem and the associated border effect. (C) 2021 Elsevier Inc. All rights reserved.

Spatial externalitiesSpatial diffusionDifferential games in continuous time and spaceInfinite dimensional optimal control problemsEnvironmental federalismTRANSBOUNDARY POLLUTION-CONTROLDIFFERENTIAL-GAMESGROWTHENFORCEMENTSPILLOVERSQUALITYBORDERSCHINA

Fabbri, Giorgio、Federico, Salvatore、Gozzi, Fausto、Boucekkine, Raouf

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Univ Grenoble Alpes

Univ Genoa

Libera Univ Sociali Guido Carli

Rennes Sch Business

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2022

10.1016/j.geb.2021.12.002

Games and economic behavior

Games and economic behavior

SSCI
ISSN：0899-8256
年,卷(期)：2022.132
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