Towards an understanding of tradeoffs between regional wealth, tightness of a common environmental constraint and the sharing rules
Consider 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., imposed 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 political pressure, or compel them to employ it by using the coupled constraints' Lagrange multipliers as taxation coefficients. We specify a stylised model of the Belgian regions of Flanders and Wallonia that face a joint constraint, for which the regulator wants to develop a sharing rule. We analytically and numerically analyse the equilibrium regional production levels as a function of the pollution standards and of the sharing rules. We thus provide the regulator with an array of equilibria that he (or she) can select for implementation. For the computational results, we use NIRA, which is a piece of software designed to min-maximise the associated Nikaido-Isoda function.
If 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
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.:
- Romer, Paul M, 1986.
"Increasing Returns and Long-run Growth,"
Journal of Political Economy,
University of Chicago Press, vol. 94(5), pages 1002-1037, October.
- Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
- Steffan Berridge & Jacek Krawczyk, "undated". "Relaxation Algorithms in Finding Nash Equilibrium," Computing in Economics and Finance 1997 159, Society for Computational Economics.
- Jacek B. Krawczyk & Steffan Berridge, 1997. "Relaxation Algorithms in Finding Nash Equilibria," Computational Economics 9707002, EconWPA.
- 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.
- 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.
- 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, "undated". "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).
- 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.
- 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.
- Jacek Krawczyk, 2007. "Numerical solutions to coupled-constraint (or generalised Nash) equilibrium problems," Computational Management Science, Springer, vol. 4(2), pages 183-204, April.
- Marc Germain & Philippe Monfort & Thierry Bréchet, 2006. "Allocation des efforts de dépollution dans des économies avec spécialisation internationale," Revue économique, Presses de Sciences-Po, vol. 57(2), pages 219-239.
- GERMAIN, Marc & MONFORT, Philippe & BRECHET, Thierry, "undated". "Allocation des efforts de dépollution dans des économies avec spécialisation internationale," CORE Discussion Papers RP 1851, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Jong-Shi Pang & Masao Fukushima, 2005. "Quasi-variational inequalities, generalized Nash equilibria, and multi-leader-follower games," Computational Management Science, Springer, vol. 2(1), pages 21-56, 01. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:eee:dyncon:v:34:y:2010:i:9:p:1813-1835. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
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.