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arXiv · 2101.08424

Climate Change Adaptation under Heterogeneous Beliefs

Marcel Nutz·Florian Stebegg
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Abstract

We study strategic interactions between firms with heterogeneous beliefs about future climate impacts. To that end, we propose a Cournot-type equilibrium model where firms choose mitigation efforts and production quantities such as to maximize the expected profits under their subjective beliefs. It is shown that optimal mitigation efforts are increased by the presence of uncertainty and act as substitutes; i.e., one firm's lack of mitigation incentivizes others to act more decidedly, and vice versa.

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Marcel Nutz, Florian Stebegg. 2021-01-21. Climate Change Adaptation under Heterogeneous Beliefs. https://arxiv.org/abs/2101.08424

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