Towards an understanding of tradeoffs between regional wealth, tightness of a common environmental constraint and the sharing rules
AbstractConsider a country with two regions that have developed differently so that their current levels of energy efficiency differ. Each region's production involves the emission of pollutants, on which a regulator might impose restrictions. The restrictions can be related to pollution standards that the regulator perceives as binding the whole country (e.g., enforced by international agreements like the Kyoto Protocol). We observe that the pollution standards define a common constraint upon the joint strategy space of the regions. We propose a game theoretic model with a coupled constraints equilibrium as a solution to the regulator's problem of avoiding excessive pollution. The regulator can direct the regions to implement the solution by using a political pressure, or compel them to employ it by using the coupled constraints' Lagrange multipliers as taxation coefficients. We specify a stylised model that possesses those characteristics, of the Belgian regions of Flanders and Wallonia. We analytically and numerically analyse the equilibrium regional production levels as a function of the pollution standards and of the sharing rules for the satisfaction of the constraint. For the computational results, we use NIRA, which is a piece of software designed to min-maximise the associated Nikaido-Isoda function.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2008055.
Date of creation: 01 Oct 2008
Date of revision:
Contact details of provider:
Postal: Voie du Roman Pays 34, 1348 Louvain-la-Neuve (Belgium)
Fax: +32 10474304
Web page: http://www.uclouvain.be/core
More information through EDIRC
coupled constraints; generalised Nash equilibrium; Nikaido-Isoda function; regional economics; environmental regulations.;
Other versions of this item:
- Boucekkine, Raouf & Krawczyk, Jacek B. & Vallée, Thomas, 2010. "Towards an understanding of tradeoffs between regional wealth, tightness of a common environmental constraint and the sharing rules," Journal of Economic Dynamics and Control, Elsevier, vol. 34(9), pages 1813-1835, September.
- Raouf, BOUCEKKINE & Jacek B., KRAWCZYK & Thomas, VALLEE, 2008. "Towards an understanding of tradeoffs between regional wealth, tightness of a common environmental constraint and the sharing rules," Discussion Papers (ECON - DÃ©partement des Sciences Economiques) 2008035, Université catholique de Louvain, Département des Sciences Economiques.
- Raouf Boucekkine & Jacek B. Krawczyk & Thomas Vallée, 2009. "Towards an understanding of tradeoffs between regional wealth, tightness of a common environmental constraint and the sharing rules," Working Papers hal-00422486, HAL.
- BOUCEKKINE, Raouf & KRAWCZYK, Jacek B. & VALLEE, Thomas, . "Towards an understanding of tradeoffs between regional wealth, tightness of a common environmental constraint and the sharing rules," CORE Discussion Papers RP -2332, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
- C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
- D7 - Microeconomics - - Analysis of Collective Decision-Making
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-11-25 (All new papers)
- NEP-CMP-2008-11-25 (Computational Economics)
- NEP-ENV-2008-11-25 (Environmental Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Paul M Romer, 1999.
"Increasing Returns and Long-Run Growth,"
Levine's Working Paper Archive
2232, David K. Levine.
- Krawczyk, Jacek B., 2005. "Coupled constraint Nash equilibria in environmental games," Resource and Energy Economics, Elsevier, vol. 27(2), pages 157-181, June.
- Contreras, Javier & Krawczyk, Jacek & Zuccollo, James, 2008. "The invisible polluter: Can regulators save consumer surplus?," MPRA Paper 9890, University Library of Munich, Germany.
- Boucekkine Raouf & Germain Marc, 2009.
"The Burden Sharing of Pollution Abatement Costs in Multi-Regional Open Economies,"
The B.E. Journal of Macroeconomics,
De Gruyter, vol. 9(1), pages 1-34, June.
- BOUCEKKINE, Raouf & GERMAIN, Marc, . "The burden sharing of pollution abatement costs in multi-regional open economies," CORE Discussion Papers RP -2114, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Jacek Krawczyk, 2007. "Numerical solutions to coupled-constraint (or generalised Nash) equilibrium problems," Computational Management Science, Springer, vol. 4(2), pages 183-204, April.
- Krawczyk, Jacek & Zuccollo, James, 2006. "NIRA-3: An improved MATLAB package for finding Nash equilibria in infinite games," MPRA Paper 1119, University Library of Munich, Germany.
- Jacek B. Krawczyk & Steffan Berridge, 1997.
"Relaxation Algorithms in Finding Nash Equilibria,"
- Jacek B. Krawczyk & Mabel Tidball, 2009. "How to use Rosen's normalised equilibrium to enforce a socially desirable Pareto efficient solution," Working Papers 09-20, LAMETA, Universtiy of Montpellier, revised Jan 2011.
- Laurent Drouet & Alain Haurie & Francesco Moresino & Jean-Philippe Vial & Marc Vielle & Laurent Viguier, 2008. "An oracle based method to compute a coupled equilibrium in a model of international climate policy," Computational Management Science, Springer, vol. 5(1), pages 119-140, February.
- Raouf Boucekkine & Natali Hritonenko & Yuri Yatsenko, 2011. "Sustainable growth under pollution quotas: optimal R&D, investment and replacement policies," Working Papers halshs-00632887, HAL.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alain GILLIS).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.