The purpose of this paper is to consider the effects of common property resources upon a model of induced technical change for the firm. These resources are such that their property rights cannot be allocated. The model assumes the firm maximizes its discounted profits by choosing factor input combinations and technical innovation subject to the constraints of a production function and an innovation process function. Our results indicate that technical change will be induced to favor the use of common property resources. Moreover the imposition of an effluent charge for these resources may result in an alteration in growth of innovations chosen by the firm. If uncertainty and incomplete information are introduced into the model, it is not unreasonable to hyphothesize that effluent charges may result in technical change with lowers average costs below their previous levels.
ASJC Scopus subject areas
- Economics and Econometrics