Coalition Formation and Environmental Policies in International Oligopoly Markets
AbstractThis paper analyzes the problem of international environmental cooperation as a coalition formation game. For this purpose, we develop a simple model with three countries of unequal size. Strate- gic interactions between those countries come from the imperfect competition among producers in global markets and from the transboundary pollution generated by the ?rms. To capture e¢ ciency gains from coordinating policies, countries can join a coalition and sign an international environmental agreement. The equilibrium coalition structure then depends on the country-size asymmetry and on the marginal environmental damage. Interestingly, we show that the grand coalition is less likely to emerge as an equi- librium outcome once two countries form a subcoalition. Furthermore, the further enlargement of the initial subcoalition can be blocked either by the outsider or by the insiders.
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Bibliographic InfoPaper provided by Toulouse School of Economics (TSE) in its series TSE Working Papers with number 12-364.
Date of creation: Apr 2012
Date of revision:
Other versions of this item:
- Cavagnac, Michel & Cheikbossian, Guillaume, 2012. "Coalition Formation and Environmental Policies in International Oligopoly Markets," LERNA Working Papers 12.29.386, LERNA, University of Toulouse.
- F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-01-07 (All new papers)
- NEP-CDM-2013-01-07 (Collective Decision-Making)
- NEP-ENE-2013-01-07 (Energy Economics)
- NEP-ENV-2013-01-07 (Environmental Economics)
- NEP-GTH-2013-01-07 (Game Theory)
- NEP-NET-2013-01-07 (Network Economics)
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