Strategic responses to automobile emissions control: A game-theoretic analysis

This paper examines the dynamics of standard-setting regulation under technological uncertainty and asymmetric information about technological capability. A two-period model which allows fully strategic action is developed and applied to the regulation of automobile emissions, a situation in which s...

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Bibliographic Details
Published in:Journal of environmental economics and management 1988-12, Vol.15 (4), p.419-438
Main Author: Yao, Dennis A
Format: Article
Language:English
Subjects:
Air pollution
Emission standards
Emissions control
Force
Game theory
Mathematical models
Pollution control
R&D
Regulation
Research & development
Research & development expenditures
Road traffic
Social impact
Strategy
Technology
Uncertainty
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Summary:This paper examines the dynamics of standard-setting regulation under technological uncertainty and asymmetric information about technological capability. A two-period model which allows fully strategic action is developed and applied to the regulation of automobile emissions, a situation in which standards have been used to “force” innovation. It is found that the initial level of R & D activity caused by regulation increases with the intrinsic technical capability of industry. This result done not depend on marginal productivities of research that favor high-capability types and implies that a poor-capability industry will not attempt to compensate for its inability to innovate with increased research activity. It is also found that the regulator's ability to induce investment is greater when R & D is likely to be unsuccessful.
ISSN:0095-0696
1096-0449
DOI:10.1016/0095-0696(88)90036-8