Abstract
For a simple economic model of transfrontier pollution, widely used in theoretical studies of international treaties bearing on joint abatement, we offer in this paper a scheme for sharing national abatement costs through international financial transfers that is inspired by a classical solution concept from the theory of cooperative games—namely, the core of a game. The scheme has the following properties: total damage and abatement costs in all countries are minimized (optimality property), and no coalition or subset of countries can achieve lower total costs for its members by taking another course of action in terms of emissions or transfers, under some reasonable assumption about the reactions of those not in the coalition (core property). In the concluding section economic interpretations of the scheme are proposed, including its connection with the free riding problem.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
Barrett, S., 1992. International environmental agreements as games, in R. Pethig,(ed.). Conflicts and cooperation in managing environmental resources. Berlin: Springer-Verlag, 11–36.
Bernheim, D., Peleg, B. and Whinston, M.D., 1986. Coalition proof Nash equilibria. I: concepts, Journal of Economic Theory, 42(1), 1–12.
Carraro, C., and Siniscalco, D., 1993. Strategies for the international protection of the environment, Journal of Public Economics, 52, 309–328.
Chander, P., 1993. Dynamic procedures and incentives in public good economies, Econometrica, 1341–1354.
Chander, P. and Tulkens, H., 1992. Theoretical foundations of negotiations and cost sharing in transfrontier pollution problems, European Review, 36(2/3), 288–299. (Chapter 6 in this volume).
Chander, P. and Tulkens, H., 1997. The core of an economy with multilateral environmental externalities, International Journal of Game Theory, 26, 379–401. (Chapter 8 in this volume).
Dasgupta, P., Hammond, P. and Maskin, E., 1980. On imperfect information and optimal pollution control, Review of Economic Studies, 47, 857–860.
D’Aspremont, C. and Gerard-Varet, L., 1992. Incentive theory applied to negotiations on environmental issues: national strategies and international cooperation. Louvain-la-Neuve: Center for Operations Research and Econometrics, Université catholique de Louvain, mimeo.
Drèze, J.H. and de la Vallée Poussin, D., 1971. A tâtonnement process for public goods, Review of Economic Studies, 38, 133–150.
Foley, D., 1970. Lindahl solution and the core of an economy with public goods, Econometrica, 38, 66–72.
Friedman, J., 1990. Game theory with applications to economics (2nd ed.). Oxford: Oxford University Press.
Germain, M., Toint, Ph. and Tulkens, H., 1996. Calcul économique itératif pour les négociations internationales sur les pluies acides entre la Finlande, la Russie et l’Estonie, Annales d’Economie et de Statistique (Paris), 43, 101–127.
Hoel, M., 1992. Emission taxes in a dynamic international game of CO2 emissions, in R. Pethig (ed.). Conflicts and cooperation in managing environmental resources. Berlin: Springer-Verlag, 39–68.
Kaitala, V., Maler, K-G. and Tulkens, H., 1992. The acid rain game as a resource allocation process, with application to negotiations between Finland, Russia and Estonia, The Scandinavian Journal of Economics, 97(2) 325–343. Reprinted in Carlo Carraro, (ed.), 2003. Governing the global environment: the globalization of the world economy. Cheltenham: Elgar Reference Collection. (Chapter 7 in this volume).
Kwerel, E., 1977. To tell the truth: imperfect information and optimal pollution control, Review of Economic Studies, 44, 595–601.
Laffont, J.J., 1977. Effets externes et théorie économique. Monographies du Séminaire d-Econométrie. Paris: Editions du Centre National de la Recherche Scientifique (CNRS).
Mäler, K.-G., 1989-1993. The acid rain game, in H. Folmer and E. Van Ierland (eds.). Valuation methods and policy making in environmental economics. Amsterdam: Elsevier, chapter 12, 231–252.
Mäler, K.-G., 1993. The acid rain game II, Beijer Discussion Paper Series 32. Stockholm: Beijer International Institute of Ecological Economics, Royal Swedish Academy of Sciences.
Scarf, H., 1971. On the existence of a cooperative solution for a general class of n-person games, Journal of Economic Theory, 3, 169–181.
Shapley, L. and Shubik, M., 1969. On the core of an economic system with externalities, American Economic Review, 59, 678–684.
Tulkens, H., 1979. An economic model of international negotiations relating to transfrontier pollution, in K. Krippendorff (ed.), Communication and control in society. New York: Gordon and Breach, 199–212. (Chapter 5 in this volume).
Author information
Authors and Affiliations
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2006 Springer Science+Business Media, LLC
About this chapter
Cite this chapter
Chander, P., Tulkens, H. (2006). A Core-Theoretic Solution for the Design of Cooperative Agreements on Transfrontier Pollution. In: Chander, P., Drèze, J., Lovell, C.K., Mintz, J. (eds) Public goods, environmental externalities and fiscal competition. Springer, Boston, MA. https://doi.org/10.1007/978-0-387-25534-7_11
Download citation
DOI: https://doi.org/10.1007/978-0-387-25534-7_11
Publisher Name: Springer, Boston, MA
Print ISBN: 978-0-387-25533-0
Online ISBN: 978-0-387-25534-7
eBook Packages: Business and EconomicsEconomics and Finance (R0)