Stochastic Switching Games and Duopolistic Competition in Emissions Markets

DOI10.1137/100784977zbMATH Open1252.91008arXiv1001.3455OpenAlexW2009910800MaRDI QIDQ5388673FDOQ5388673

Authors: Michael Ludkovski 

Publication date: 19 April 2012

Published in: SIAM Journal on Financial Mathematics (Search for Journal in Brave)

Abstract: We study optimal behavior of energy producers under a CO_2 emission abatement program. We focus on a two-player discrete-time model where each producer is sequentially optimizing her emission and production schedules. The game-theoretic aspect is captured through a reduced-form price-impact model for the CO_2 allowance price. Such duopolistic competition results in a new type of a non-zero-sum stochastic switching game on finite horizon. Existence of game Nash equilibria is established through generalization to randomized switching strategies. No uniqueness is possible and we therefore consider a variety of correlated equilibrium mechanisms. We prove existence of correlated equilibrium points in switching games and give a recursive description of equilibrium game values. A simulation-based algorithm to solve for the game values is constructed and a numerical example is presented.

Full work available at URL: https://arxiv.org/abs/1001.3455

Recommendations

• Analysis of a duopoly game with heterogeneous players participating in carbon emission trading
• Transboundary emission under stochastic differential game
• Capital-accumulation games under environmental regulation and duopolistic competition
• A two-level differential game of international emissions trading
• A dynamic multi-objective duopoly game with environmentally concerned firms
• Coordinating carbon emissions via production quantities: a differential game approach
• A stochastic differential game of duopolistic competition with sticky prices
• A GAME-THEORETIC TREATMENT OF A TIME-DISCRETE EMISSION REDUCTION MODEL
• A Stackelberg-Nash-Cournot equilibrium in a pollution reduction scheme
• The game-theoretic emission reduction model

zbMATH Keywords

correlated equilibriumdynamic gamesswitching gamesemission abatement programm

Mathematics Subject Classification ID

2-person games (91A05) Production models (90B30) Stochastic games, stochastic differential games (91A15) Financial applications of other theories (91G80)

Cited In (4)

• AHEAD: \textit{ad hoc} electronic auction design
• A Stackelberg-Nash-Cournot equilibrium in a pollution reduction scheme
• On the equality of solutions of max-min and min-max systems of variational inequalities with interconnected bilateral obstacles
• An impulse-regime switching game model of vertical competition

This page was built for publication: Stochastic Switching Games and Duopolistic Competition in Emissions Markets

Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q5388673)