Environmental delegation versus sales delegation: a game-theoretic analysis

Abstract Recently, in their 2019 paper, Poyago-Theotoky and Yong consider a managerial Cournot duopoly with pollution externalities emission taxes propose an explicit environmental incentive compensation contract. The authors compare several exogenous equilibria emerging the symmetric sub-games which owner offers either delegation contract or standard sales contract: abatement social welfare (resp. taxes) under are higher lower) than delegation. present work extends model using game-theoretic approach to analyse asymmetric sub-games, only one firm adopts contract, adds decision stage. Results show that never emerges as unique sub-game perfect Nash equilibrium of this non-cooperative game. Indeed, if green R&D technology is efficient, Pareto-inefficient equilibrium. Otherwise, inefficient, multiple pure strategies exist (coordination game). Our findings offer direct policy implications.