earticle

영어

A lot of literature has discussed governmental regulations such as emission regulations or emission taxes as a way to deal with environmental problems caused by production activities of firms. These regulations provide firms with incentives to reduce pollutant emissions. Providing such incentives may be possible not only through governmental regulations but also through consumers’ consumption behavior. In this paper, we analyzed the competition for environmental R&D investment in a duopoly market where there is a gap in productivity between firms and a reduction effect in demand due to the competitor’s investment. We consider three cases. Case 1 is that both firms decide the scales of investment simultaneously, case 2 is that the firm with relatively high productivity decides first, and case 3 is that the firm with relatively low productivity decides first. The main results are as follows: First, as the gap in productivity grows, the gap in investment scale also increases. Second, when the investment scale is decided simultaneously or when the firm with high productivity takes the leader, the gap in investment scale between both firms widens as the reduction effect of demand increases. Third, when the firm with low productivity takes the leader, the investment scale of the leader is larger than the follower if the reduction effect of demand is large even though the gap in productivity is large. However, if the productivity gap is sufficiently small, the investment scale of the leader is larger than the follower regardless of the reduction effect of demand. Finally, when the firm with high productivity is the leader, the least environmental damage and the greatest social welfare is realized compare to the other cases.