This article develops a non-cooperative game with managerial quantity-setting firms in which owners choose whether to delegate output and abatement decisions to managers through a contract based on emissions (conventionally denoted as ‘green’ delegation, GD) instead of sales (sales delegation, SD), and the government levies an emissions tax to incentivise firms’ emissions-reduction actions. First, it compares the Nash equilibrium outcomes between GD and SD and then contrasts them also with profit maximisation (PM). A plethora of Nash equilibria emerges, especially in the case GD versus PM (the ‘green delegation game’), depending on the public awareness toward environmental quality, ranging from the coordination game to the ‘green’ prisoner's dilemma. Second, though the contract under GD incentivises managers for emissions, the environmental damage is lower than under SD. This is because the optimal tax more than compensates the incentive for emissions. These findings suggest that designing GD contracts paradoxically favours environmental quality.

The COVID‐19 pandemic is still ravaging the planet, but its (short‐, medium‐, and long‐term) diverse effects on health, economy, and society are far from being understood. This article investigates the potential impact of a deadly epidemic and its main nonpharmaceutical control interventions (social distancing vs. testing–tracing–isolation, TTI) on capital accumulation and economic development at different time scales. This is done by integrating an epidemiological susceptible–infectious–recovered model with a Solow‐type growth model including public expenditure, as a parsimonious setting to offer insights on the trade‐off between protecting human lives and the economy and society. The work clarifies (i) the long‐term interactions amongst a deadly infection, demography, and capital accumulation, (ii) the lack of viability of persistent social distancing measures also using an analytical characterization, and the threat of policy‐enhanced COVID‐19 endemicity, (iii) the potentially high return on investments in TTI activities to avoid future lockdowns and related capital disruption. It also quantifies the welfare effects of a range of policies, confirming a counterintuitive role for tax‐funded preventive investments aimed at strengthening TTI as more desirable interventions than generalized lockdowns.

This article augments d’Aspremont and Jacquemin’s [1988. “Cooperative and Noncooperative R&D in Duopoly with Spillovers.” American Economic Review 78: 1133–1137; 1990. “Cooperative and Noncooperative R&D in Duopoly with Spillovers: Erratum.” American Economic Review 80: 641–642] cost-reducing R&D duopoly by introducing network externalities and product compatibility and then considers the investment decision stage. For standard non-network industries, the received literature has robustly shown that the non-cooperative R&D investment decision game is, without technological spill-over, a prisoner’s dilemma with investing firms (there is a conflict between self-interest and mutual benefit of investing in R&D), and a deadlock (there is no conflict between self-interest and mutual benefit of investing in R&D) only whether the extent of technological spill-over is sufficiently high. Network externalities and product compatibility challenge this result. In fact, outcomes antithetical to those emerging in a non-network industry do exist. Under symmetric full compatibility, the game is a deadlock also without spill-over effects. Under symmetric incompatibility, the game can be a prisoner’s dilemma irrespective of the extent of the technological spill-over. From a policy perspective, the article shows that R&D subsidies or taxes can be used as social welfare maximising tools depending on the extent of the network externality and the degree of product compatibility. The work focuses on Cournot rivalry, but results hold also for price-setting firms (Bertrand rivalry).