Environmental Policies within Cournot Oligopoly

We consider how to effectively regulate environmental policies with clear penalties and rewards, through a game-theoretical point of view. To this end, we use social welfare as the primary metric for evaluation. We demonstrate that the best possible social welfare can be achieved through policies that incorporate both linear taxation and subsidies in a Cournot competition model. To make it constructive, we propose efficient algorithms to find optimal policies in a Cournot competition model. Our work can be seen as the first step towards obtaining the optimal environmental policy through the lens of computation.