In 2015 it was discovered that Volkswagen had manipulated the exhaust emissions of its (diesel) cars. Since then, numerous other automotive car manufacturers were strongly suspected to violate against the same emission standards. This paper investigates how and why firms (monopoly, cartel and duopoly) engage in cheating, more precisely, promising attributes that are actually not part of the product. Firms make claims in order to better market their product but risk damaging their future reputation. The upshot of the paper is the stark difference between open loop and Markov perfect oligopolistic equilibrium outcomes. More precisely, the latter mitigates cheating substantially even below the levels attained by monopolies and cartels (unless consumers have a very short memory), which is contrary to the outcome in the limiting static version of the game. Therefore, revealing the true state (e.g., by mandating strict inspections) could force firms to use this information and play in Markov instead of open loop strategies. Keywords Cheating • Differential game • Competition • Dieselgate JEL Classification C71 • C72 • D25 • D43 • L10 • M30 Incidentally, the authors as well as the laureate Gustav Feichtinger and some of his team were also thinking about a model to understand Volkswagen's strategy. We thank for the brief exchange of ideas and our contribution is to bring a game to this topic. Franz Wirl also uses this opportunity to thank Gustav Feichtinger for his long-standing support, the many interesting discussions and the past and hopefully future cooperations.

This paper investigates strategic trade policies as a response to negative externalities linked to climate engineering. Parties negatively affected, or which only perceive damages, may react to geoengineering by deploying trade sanctions, i.e. the imposition of tariffs. By introducing a dynamic trade model, we show that geoengineering-averse countries have an incentive to implement or increase existing tariffs when the other country uses geoengineering. Our contribution is to highlight that potential consequences on trade should be taken into account before climate engineering techniques are applied. This is particularly crucial in our globalized world since a successful climate policy demands large scale if not global cooperation.

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