Environmental Liability and Technology Choice:A Duopolistic Analysis
Gérard Mondello, M. Tidball
duopoly,environmental investment,liability theory
Climate Change and Sustainable Development
This paper focuses both on the competition process and the firms liability in environmental
protection and the demonstration is made by comparing two models of safety investment. The
rst one shows sensitive players to their environmental liability: they seek to minimize the
technologies accident risk while the second one corresponds to a much more standard choice. The
players main preoccupation is about their market share even if they care about liability. Then,
from a very simple duopolistic competition model with strict liability, we show, first, that the
way the firms assess the environmental question is not neutral on their expected performances.
Second, that the associated level of technology to the liability concern – i.e. a high level of care or
a low one- have different impact on profitability. Consequently, the competitors general attitude,
their beliefs and the institutional rules have strong e ects on the environmental investment
assessments. More precisely, the enforcing rule the players will adopt will play directly on the
performance, not only of one firm, but on the whole set of industrial firms.