Optimal accumulation of pollution: Existence of limit cycles for the social optimum and the competitive equilibrium

This paper extends the recent investigation of Tahvonen and Withagen (1996, Journal of Economic Dynamics and Control 20, 1775-1795) for costly and thu s sluggish instead of instantaneous reductions in emissions. In addition to the social optimum, the paper investigates the competitive equilibrium. Th is plausible extension allows to derive limit cycles as the outcome for bot h, the social optimum and a competitive equilibrium given rational expectat ions of the firms. (C) 2000 Elsevier Science B.V. All rights reserved. JEL classification: C61; C62; D62.