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Strategic Environmental Policy, International Trade and Self-enforcing Agreements: The Role of Consumers' Taste for Variety

Author

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  • Finus, Michael
  • Al Khourdajie, Alaa

Abstract

We study the coordination of environmental policy within an agreement in the context of international trade. In an n-country intra-industry trade model, firms produce a horizontally differentiated good and consumers have a taste for variety. Governments choose strategically an emission tax and their membership in an international agreement. We show that only a strong taste for variety reduces the competition among governments sufficiently enough to allow for some form of policy coordination, though full cooperation will never be obtained.

Suggested Citation

  • Finus, Michael & Al Khourdajie, Alaa, 2018. "Strategic Environmental Policy, International Trade and Self-enforcing Agreements: The Role of Consumers' Taste for Variety," Strategic Behavior and the Environment, now publishers, vol. 7(3-4), pages 317-350, February.
    • Handle: RePEc:now:jnlsbe:102.00000086
    DOI: 10.1561/102.00000086
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    Cited by:

    1. Al Khourdajie, Alaa & Finus, Michael, 2020. "Measures to enhance the effectiveness of international climate agreements: The case of border carbon adjustments," European Economic Review, Elsevier, vol. 124(C).
    2. Soham Baksi & Amrita Ray Chaudhuri, 2020. "Imperfect Competition, Border Carbon Adjustments, and Stability of a Global Climate Agreement," Departmental Working Papers 2020-03, The University of Winnipeg, Department of Economics.
    3. Tibor Besedeš & Erik P. Johnson & Xinping Tian, 2020. "Economic determinants of multilateral environmental agreements," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 27(4), pages 832-864, August.

    More about this item

    Keywords

    Strategic environmental policy; International trade; Self-enforcing international agreements; Horizontal product differentiation; Taste for variety;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • F18 - International Economics - - Trade - - - Trade and Environment
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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