Even very simple models require attention to detail. In [link] we described simple model from the literature. A related model with a coupling constraint that limits pollution emissions is described in:
- Jacek Krawczyk and James Zuccollo, NIRA-3: An improved MATLAB package for finding Nash equilibria in infinite games, Victoria University of Wellington, December 2006
- Lars Mathiesen, Regulation of pollution in a Cournot equilibrium, The Norwegian School of Economics and Business Administration, Bergen, June 2008.
The Nash-Cournot model without pollution controls is simply:
Adding the pollution controls using taxes (or tradable quotas) is not that difficult:
Still for this simple model I get different results for the base case (no pollution controls). My results are:
---- 135 PARAMETER results
output profit emission price
no control .j1 55.351 61.274
The paper  has the following results:
The second part corresponds to my solutions, but the first part shows differences. As the problem with controls is an extension of the problem without controls, there is actually a reasonable chance my solution is correct.