Abstract
A model of an interaction between a manufacturer and the state where the manufacturer produces a single product and the state controls the level of pollution is created and investigated. A local economy with a stock pollution problem that must choose between productive and environmental investments (control functions) is considered. The model is described by a nonlinear system of two differential equations with two bounded controls. The best optimal strategy is found analytically with the use of the Pontryagin Maximum Principle and Green’s Theorem.
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