Controlling non-point source pollution in Cournot oligopolies with hyperbolic demand

This paper constructs an n-firm Cournot oligopoly in which the price function is hyperbolic. It provides a game-theoretic approach to characterize the ambient charge’s impact on NPS pollution’s total and individual emission levels. The main findings are as follows: (1) the positivity of individual Cournot output depends on the marginal production cost, the average abatement technology and the number of firms in the industry; (2) the ambient charge is effective for controlling the total amount of NPS pollution when the average marginal production cost is less than the average emission coefficient; (3) the ambient charge is also effective for controlling the individual pollution when the tax rate and the average pollution level are sufficiently high; (4) assuming hyperbolic rather than linear demand, stronger parametric conditions are necessary for the effectiveness of the ambient charge.