Adoption of a Cleaner Technology by a Monopoly Under Incomplete Information

Ben Youssef, Slim (2008): Adoption of a Cleaner Technology by a Monopoly Under Incomplete Information.

Abstract

We consider a model consisting of a monopolistic firm producing a certain good with pollution. This firm can adopt a cleaner technology within a finite time by incurring an investment cost decreasing exponentially with the adoption date. At each period of time, the firm is regulated by an emission tax which induces the socially optimal pollution and production levels, and a lump sum tax on profit. The firm is induced to adopt the cleaner technology at the socially optimal date by an appropriate innovation subsidy. In the incomplete information context, the firm has private information concerning the cost of acquiring the new technology. By an appropriate contract consisting of an adoption date and a R&D subsidy depending on the value of the innovation cost parameter announced by the firm, the regulator can induce the latter to reveal the true value of its private information in compensation of a socially costly intertemporal informational rent. However, the socially optimal adoption date of incomplete information is delayed with respect to the complete information one.

• Item Type: MPRA Paper
• Language: English
• Keywords: cleaner technology; adoption date; incomplete information
• Subjects: H - Public Economics > H5 - National Government Expenditures and Related Policies > H57 - Procurement; D - Microeconomics > D6 - Welfare Economics > D62 - Externalities; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information ; Mechanism Design; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O32 - Management of Technological Innovation and R&D

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