Environmental negotiations as dynamic games: Why so selfish?
AbstractWe study a trade-off between economic and environmental indicators using a two-stage optimal control setting where the player can switch to a cleaner technology, that is environmentally “efficient”, but economically less productive. We provide an analytical characterization of the solution paths for the case where the considered utility functions are increasing and strictly concave with respect to consumption and decreasing linearly with respect to the pollution stock. In this context, an isolated player will either immediately start using the environmentally eﬃcient technology, or for ever continue applying the old and “dirty” technology. In a two-player (say, two neighbor countries) dynamic game where the pollution results from a sum of two consumptions, we prove existence of a Nash (open-loop) equilibrium, in which each player chooses the technology selﬁshly i.e., without considering the choice made by the other player. A Stackelberg game solution displays the same properties. Under cooperation, the country reluctant to adopt the technology as an equilibrium solution, chooses to switch to the cleaner technology provided it beneﬁts from some “transfer” from the environmentally efficient partner.
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Bibliographic InfoPaper provided by Business School - Economics, University of Glasgow in its series Working Papers with number 2009_07.
Date of creation: 2008
Date of revision:
Pollution; technology adoption; optimal control; dynamic games;
Other versions of this item:
- Raouf BOUCEKKINE & Jacek B. KRAWCZYK & Thomas VALLEE, 2009. "Environmental negotiations as dynamic games : Why so selfish ?," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2009009, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- BOUCEKKINE, RAOUF & KRAWCZYK, Jacek B. & VALLEE, Thomas, 2009. "Environmental negotiations as dynamic games: Why so selfish?," CORE Discussion Papers 2009010, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
- Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
- Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
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