A Multistage Bicriteria Production Game with Pollution Control

In the chapter, we introduce and examine a finite-horizon bicriteria oligopoly game with pollution control, which takes into account both the economic objective of each player and the players’ concern of cleaner environment at each stage of the game. Noncooperative (viz., subgame-perfect Pareto equilibrium) and cooperative solutions are derived in explicit form for two-person game with symmetric players using the dynamic programming method. Some properties of these solutions are established. We provide a numerical example to demonstrate the theoretical results and to compare single-criterion and bicriteria model as well as noncooperative and cooperative solutions. It turns out that a cooperative regime is better for the environment (i.e., implies lower level of the pollution stock) than a competitive behavior both in the bicriteria model and its single-criterion counterpart.