Stable International Environmental Agreements: An Analytical Approach

In this paper we examine the formation of international environmental agreements (IEAs). We show that the welfare of the signatories does not increase monotonically with respect to the number of signatories. We provide an analytical solution of the leadership model. In particular, we find that if the number of countries is greater than four then there exists a unique stable IEA with either two, three, or four signatories. Furthermore, we show that the welfare of the signatories is almost at its lowest level when the IEA is stable. While in our model each country's choice variable is emissions, we extend our results to the case where the choice variable is abatement efforts.     

Economies with Land—A Game Theoretical Approach

With an economy with land (an economy of Debreu-type in which land is the unique commodity) we associate a cooperative game with transferable utility v . The set of all TU-games of type v is investigated and the set of equilibrium payoffs (in the TU-sense) of the economy is described as a subset of the core of v . We prove that equilibrium payoffs can be extended to population monotonic allocation schemes in the sense of Sprumont.     

异质性国际环境协议的博弈论分析

国际环境协议是近年来环境经济学和应用博弈论中最引人注目的热点研究领域。前人的研究只建立在同质性国家基础上。从经济学角度建立异质国家模型,考虑国家在国际环境协议中成本和收益为异质的情况下,利用博弈论理论推导排放博弈和联盟博弈中的纳什均衡,得出几点重要结论。     

A Dynamic Model for International Environmental Agreements

In this paper we develop a model that uses a dynamic framework to analyze the process through which countries join international environmental agreements (IEAs). In the model, while all countries suffer from the same environmental damage as a result of total global emissions, non-signatory countries decide on their emission levels by maximizing their own welfare, whereas signatory countries decide on their emission levels by maximizing the aggregate welfare of all signatory countries. It is assumed that signatory countries will be able to punish non-signatories, at some cost to themselves. When countries decide on their pollution emissions, they account for the evolution of the stock of pollution over time. Moreover, we propose a mechanism to describe how countries reach a stable IEA. The model is able to capture situations characterized by partial cooperation within an IEA that is stable over time. It also captures situations where all countries participate in a stable agreement, and situations where no stable agreement is feasible. Where more than one possibility coexist, the long-term outcome of the game depends on the initial conditions (i.e., the initial number of signatory countries and pollution level).     

Richer Harvests: A CAI Approach to Teaching Fisheries Economics

A computer spreadsheet is shown to have an important role in helping students come to grips with some of the analytical complexities of the economics of fisheries.     

A Theoretical Perspective on Multilateral Agreements on Investment*

Why do we observe some developing countries objecting to the prospect of a Multilateral Agreement on Investment (MAI), even though they have been keen to liberalize investment in preferential agreements in recent years? In this paper, we analyze the issue of MAI implementation and assess the welfare consequences of such kind of agreements. In our model, participation to MAI involves a tradeoff between less rent extraction from multinational firms (MNEs) and more abundant FDI inflows. At equilibrium, either all countries enter MAI, or all countries stay out, or only some of them enter. Coordination problems may induce multiple equilibria: the three types of equilibria may coexist. So, the implementation of MAI may depend not only on structural factors but also on the general “political climate.” When all countries join MAI, world welfare is maximized because this minimizes the hold‐up problem faced by MNEs and stimulates investment. However, in an asymmetric world, welfare gains are not guaranteed for all countries.     

Disability and Economy: A Game Theoretic Approach

This paper takes a game theoretic approach to disability‐related issues by constructing a model that studies the case of hereditary deafness on Martha's Vineyard Island, USA from the seventeenth century to the early years of twentieth, where the island community adjusted itself to the hereditary deafness so that it was not treated as a disability. The model of the present paper has two stages. First of all, there are two types of continua of agents, the deaf and the non‐deaf. In the first stage, the non‐deaf agents become either bilinguals or monolinguals. In the second stage, agents are classified into deaf people, bilinguals and monolinguals. They are then randomly matched to form a trio to play a three‐person bargaining game with infinite horizon, random proposers and language constraints. Two bargaining games are considered. The first one is a majority bargaining game where only two out of three can agree to implement a bargaining outcome. The second one is a unanimity bargaining game where all three agents are required to reach an agreement. The majority game exhibits strategic complementarity, while the unanimity game exhibits strategic substitutability. This paper also takes an inductive approach to examine how prejudice against people with disability may emerge.     

International Environmental Agreements and Black Technology

Environmental and Resource Economics - This paper analyzes the stability of international environmental agreements in a dynamic game when the generation of both renewables and fossil fuel based...     

International Environmental Agreements under Endogenous Uncertainty

This paper explores the implications of the possibility of a shift in environmental damages on the participation in environmental treaties. Using a two‐period model where the probability of a regime shift increases in the first‐period pollution stock, we examine the issue of coalition formation under both fixed and dynamic membership. Our analysis suggests that endogenous uncertainty may increase participation. We find that full cooperation may be sustained, but only in the presence of endogenous uncertainty. Interestingly, when the shift in the environmental damage is large enough, the model provides a way to solve the “puzzle of small coalitions” found in the literature related to international environmental agreements. We also find that in period 1 (period 2) endogenous uncertainty leads to a lower (higher) pollution stock under dynamic membership as compared to the fixed membership case.     

OPEC's Response to International Climate Agreements

This paper studies a game between a group of countries that have agreed to participate in an international climate agreement (the signatories) and OPEC. The purpose of the signatories is to design carbon taxes that maximize their total net income, given a goal on global carbon emissions. As a response to the climate agreement, OPEC imposes an oil tax on its member states that maximizes OPEC's profits. Within a numerical model we find the subgame-perfect equilibrium of a game in which each player chooses when to fix his decision variables. It is shown that in equilibrium the group of signatories chooses to be the leader and OPEC chooses to be the follower. It is demonstrated, however, that for both agents the order of move is of minor (numerical) importance. Hence, the players have limited incentives for strategic behaviour.     

International Environmental Agreements as Evolutionary Games

This paper applies evolutionary game theory to international environmental agreements (IEAs). Contrary to stage game models (Barrett in J Theor Politics 11:519–541, 1999, Eur Econ Rev 45:1835–1850, 2001), in an evolutionary equilibrium (EE) no signatory prefers to be outside the IEA and the EE is robust to trembles. With two populations, there is a unique interior EE when there is decreasing returns to abatement and small asymmetry in the externality differences across populations. At the interior EE, transfers from the poor to the rich can increase payoffs for all nations, but come at the expense of greater payoff inequality. Transfers can also eliminate the basin of attraction for the payoff inferior EE with decreasing returns to abatement and large asymmetry. Thus IEAs, such as the Kyoto Treaty, predicated on the polluter-pays and ability-to-pay principles may result in Pareto inferior outcomes.     

Toward Farsightedly Stable International Environmental Agreements

The stability of International Environmental Agreements (IEA) is analyzed by using game theory. The integrated assessment model FUND provides the cost-benefit payoff functions of pollution abatement for sixteen different world regions. The farsighted stability concept of Chwe (1994) is used and solved by combinatorial algorithms. Farsighted stability assumes perfect foresight of the players and predicts which coalitions can be formed when players are farsighted. All farsightedly stable coalitions are found, and their improvement to environment and welfare is considerable. The farsightedly stable coalitions are refined further to preferred farsightedly stable coalitions, which are coalitions where the majority of coalition members reach higher profits in comparison with any other farsightedly stable coalitions. Farsightedly stable coalitions contribute more to the improvement of environment and welfare in comparison to D'Aspremont et al.'s (1983) stable ones. Considering multiple farsighted stable coalitions, participation in coalitions for environmental protection is significantly increased, which is an optimistic result of our game theoretical model.