The Acid Rain Game as a Resource Allocation Process with an Application to the International Cooperation among Finland, Russia and Estonia
The authors consider optimal cooperation in transboundary air pollution abatement among several countries under incomplete information, i.e., local information only on marginal emission abatement costs and damage costs. Directions of emission abatement in each country are determined that generate a succession of emissions programs shown to converge to an economic optimum. A cost sharing scheme, which results from appropriately designed international transfers, guarantees that the individual costs of all parties are nonincreasing along the path towards the optimum. A version of K. G. Maaler's (1989) acid rain game is used for a numerical application. Copyright 1995 by The editors of the Scandinavian Journal of Economics.
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Volume (Year): 97 (1995)
Issue (Month): 2 (June)
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