Low-Carbon Policy in a Duopoly with Differentiated Products, Green R&D, and Knowledge Spillovers: A Cournot–Bertrand Comparison

This study examines the optimal design of low-carbon policies for governments, firms, and consumers within a unified analytical framework. We develop a three-stage game-theoretic duopoly model with differentiated products, green R&D, and knowledge spillovers to analyze the effects and implications of low-carbon policies in a polluting industry. The analysis encompasses both Cournot and Bertrand competition under commitment and non-commitment regimes, as well as non-cooperative and cooperative R&D structures. Specifically, we (i) quantify the impacts of low-carbon policies on R&D, emissions, profits, and welfare across alternative competition modes, policy-timing regimes, and R&D organizations; (ii) examine the roles of key policy parameters across all scenarios; and (iii) provide an integrated and intuitive interpretation of the underlying economic mechanisms.