A Differential Oligopoly Game with Sticky Prices and Environmental Externality

We investigate a differential oligopoly games with sticky prices and environmental externality. The external effect is determined by sales. We compute the socially optimal allocation, where a benevolent planner sets production plans so as to maximize the discounted social welfare, in both existence and non-existence environmental externality, and show that the latter equilibrium entails a larger level of steady state production as compared to the former.