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A Non-Cooperative Theory Of Quantity-Rationing International Transfrontier Pollution

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Author Info
Sudhir A. Shah (Delhi School of Economics)
Abstract

We study the problem caused by international transfrontier pollution. Our re-sults are derived from the analysis of an incomplete information, non-cooperative game model of the determination of emissions in a quantity-rationing setting. We model the emission capping negotiations using the best response dynamic pro-cess and provide natural conditions under which the process has a unique and globally asymptotically stable stationary point. We then analyze the link be-tween type profiles and the stationary points of the negotiation process to derive various comparative statics results and the type-contingent ordering of emission allocations. Finally, we study the investment strategies that nations can use prior to the negotiations in order to manipulate the equilibrium emission caps. The results have implications regarding the political economy of emission capping.

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Paper provided by Centre for Development Economics, Delhi School of Economics in its series Working papers with number 143.

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Length: 39 pages
Date of creation: Aug 2006
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Handle: RePEc:cde:cdewps:143

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Related research
Keywords: Emission capping; non-cooperative game; negotiations; incomplete information; manipulation;

Find related papers by JEL classification:
D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances
H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
Q21 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Demand and Supply (the Commons)
Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
R11 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Analysis of Growth, Development, and Changes

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    Other versions:
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  12. Ray, Debraj & Vohra, Rajiv, 1997. "Equilibrium Binding Agreements," Journal of Economic Theory, Elsevier, vol. 73(1), pages 30-78, March. [Downloadable!] (restricted)
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  13. Petrosjan, Leon & Zaccour, Georges, 2003. "Time-consistent Shapley value allocation of pollution cost reduction," Journal of Economic Dynamics and Control, Elsevier, vol. 27(3), pages 381-398, January. [Downloadable!] (restricted)
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