Pollution-Causing Firms Profit More Under Quantity Competition
The article explores how the number of companies affects profits in a market using a natural resource. They look at two ways companies can compete: by deciding how much to produce or by setting prices. The article shows that having more companies generally leads to higher profits in the production-focused competition (Cournot), compared to price-focused competition (Bertrand). For the environment, when companies act like Cournot, sometimes they are efficient in resource use, but with Bertrand, it's usually inefficient. In terms of overall well-being, the Cournot way is better when pollution is a big concern.