Since there is no supranational institution which can enforce international environmental agreements (IEAs), international cooperation proves difficult in practice. Global emissions exhibit negative externalities in countries other than that of their origin and hence there is a high interdependence between countries, and strategic considerations play an important role. Game theory analyzes the interaction between agents and formulates hypotheses about their behavior and the final outcomes in games. Hence, international environmental problems are particularly suited for analysis by this method.
The author investigates various strategies to provide countries with an incentive to accede, agree and comply to an international environmental agreement (IEA). He shows that by integrating real world restrictions into a model, game theory is a powerful tool for explaining the divergence between 'first-best' policy recommendations and 'second-best' designs of actual IEAs. For instance he explains why (inefficient) uniform emission reduction quotas have played such a prominent role in past IEAs despite economists' recommendations for the use of (efficient) market-based instruments, as for example emission targets and permits. Moreover, it is stated, that a single, global IEA on climate is not necessarily the best strategy and small coalitions may enjoy a higher stability and may achieve more. This book will be of great interest to scholars, researchers and lecturers in the fields of international environmental economics, game theory and international relations.
Author(s): Michael Finus
Publisher: Edward Elgar Publishing
Year: 2001
Language: English
Pages: 433
Contents......Page 8
List of figures......Page 12
List of tables......Page 14
Acknowledgments......Page 15
1 Introduction......Page 18
2.1 Terms......Page 24
2.2 Notation......Page 25
2.3 Taxonomy of game theory......Page 26
2.4 Outline of the book......Page 34
3.1 Introduction......Page 38
3.2 Prisoners’ dilemma......Page 39
3.3 Chicken games......Page 42
3.4 Assurance and no-conflict games......Page 46
3.5 An extension to N countries......Page 48
3.6 Convexification of payoff space......Page 51
3.7 Coordination through correlated strategies......Page 54
4.1 Introduction......Page 59
4.2 Some examples and first results......Page 60
4.3 The conceptual framework......Page 67
4.4 Some general results......Page 74
5.1 Introduction......Page 80
5.2 Folk theorems......Page 83
5.3 Discussion......Page 89
6.1 Introduction......Page 92
6.2 Some general remarks and results......Page 96
6.3 Extension: strongly perfect equilibria......Page 102
6.4 Discussion......Page 104
7.1 Weakly renegotiation-proof equilibria......Page 106
7.2 Strongly renegotiation-proof and strongly perfect equilibria......Page 116
8.1 Introduction......Page 120
8.2 The enlargement of payoff space......Page 123
8.3 The impact on stage game Nash equilibria......Page 128
8.4 Non-separable utility functions......Page 130
9.1 Introduction......Page 136
9.2 Fundamental functions and assumptions......Page 138
9.3 Best reply functions, Nash equilibrium and parameter variations......Page 140
9.4 Existence and uniqueness of Nash equilibrium......Page 148
9.5 Characterization of payoff space and normal form representation......Page 153
9.6 Social optimum......Page 154
9.7 Indifference curves, payoff structure and Pareto frontier......Page 157
10.1 Introduction......Page 166
10.2 Sequential move emission game: filterable externalities......Page 169
10.3 Sequential move emission game: transferable externalities......Page 172
10.4 Non-Nash or hybrid behavior......Page 174
10.5 Auctioning emission reductions......Page 179
10.6 Strategic matching......Page 184
10.7 The theory of reciprocity......Page 189
11.1 Introduction......Page 193
11.2 Cost-effciency of the set of instruments......Page 195
11.3 The bargaining setting......Page 196
11.4 The bargaining proposals......Page 198
11.5 Equilibrium emissions......Page 200
11.6 Equilibrium analysis......Page 202
11.7 Strategic proposals......Page 207
11.8 Summary......Page 208
12.2 Discount factors close to 1......Page 211
12.3 Discount factors smaller than 1......Page 227
13.1 Introduction......Page 236
13.2 Conjectural variation models......Page 237
13.3 The core......Page 262
14.1 Introduction......Page 275
14.2 Preliminaries......Page 277
14.3 The grand coalition......Page 278
14.4 The sub-coalition......Page 286
14.5 Summary and discussion......Page 296
15.1 Introduction......Page 300
15.2 Characterization of the per-member-partition function for positive externality games......Page 303
15.3 Static games......Page 305
15.4 Coalition formation models: simultaneous moves......Page 309
15.5 Sequential move coalition models......Page 317
16 Summary and conclusions......Page 327
I Chapter 3: appendix......Page 334
II Chapter 4: appendix......Page 336
III Chapter 5: appendix......Page 341
IV Chapter 7: appendices......Page 343
V Chapter 8: appendix......Page 347
VI Chapter 9: appendices......Page 352
VII Chapter 10: appendices......Page 354
VIII Chapter 11: appendices......Page 358
IX Chapter 12: appendix......Page 368
X Chapter 13: appendices......Page 369
XI Chapter 14: appendices......Page 378
XII Chapter 15: appendices......Page 382
References......Page 397
C......Page 422
D......Page 424
F......Page 425
G......Page 426
J......Page 427
N......Page 428
P......Page 429
S......Page 430
T......Page 432
Z......Page 433
