The trade-off technological Vs environmental efficiency at glance

We use two stage optimal control techniques to solve some adoption problems. We first consider the case of an isolated economy, which therefore takes its decisions in exclusive accordance with its own preferences and constraints. The planner has to decide whether the economy has to switch to a new technological regime, and if he believes so, he has to fix the optimal switching time. We assume that, at the date of switching, two technical menus exist which differ in their technological and environmental efficiencies. After characterizing the solution of the one-country model, we move to the more interesting two-country case. We consider the elementary situation where the two countries don't trade in goods but share the same pollution stock. We study their optimal switching policies in three game-theoretic configurations: Nash games, cooperative games, and Stackelberg games