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A strategic analysis of global warming: Theory and some numbers

  • Dutta, Prajit K.
  • Radner, Roy
Registered author(s):

    We model the global warming process as a dynamic commons game in which the players are countries, their actions at each date produce emissions of greenhouse gases, and the state variable is the current stock of greenhouse gases. The theoretical analysis is complemented by a calibration exercise. The first set of results establishes theoretically, and then with illustrative numbers, the over-emissions due to a "tragedy of the commons." The power of simple sanctions to lower emissions and increase welfare is then examined as is the effect of cost asymmetry. Finally, a complete theoretical charactrization is provided for the best equilibrium, and it is shown that it has a very simple structure; it involves a constant emission rate through time.

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    Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

    Volume (Year): 71 (2009)
    Issue (Month): 2 (August)
    Pages: 187-209

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    Handle: RePEc:eee:jeborg:v:71:y:2009:i:2:p:187-209
    Contact details of provider: Web page: http://www.elsevier.com/locate/jebo

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    1. Dockner, Engelbert J. & Van Long, Ngo & Sorger, Gerhard, 1996. "Analysis of Nash equilibria in a class of capital accumulation games," Journal of Economic Dynamics and Control, Elsevier, vol. 20(6-7), pages 1209-1235.
    2. Zhiqi Chen, 1997. "Can Economic Activities Lead to Climate Chaos? An Economic Analysis on Global Warming," Canadian Journal of Economics, Canadian Economics Association, vol. 30(2), pages 349-66, May.
    3. Prajit Dutta & Roy Radner, 2006. "Population growth and technological change in a global warming model," Economic Theory, Springer, vol. 29(2), pages 251-270, October.
    4. Rustichini, A, 1992. "Second Best Equilibria for Games of Joint Exploitation of a Productive Asset," Economic Theory, Springer, vol. 2(2), pages 191-96, April.
    5. Dutta, P.K., 1991. "What Do Discounted Optima Converge To? A Theory of Discount Rate Asymptotics in Economic Models," RCER Working Papers 264, University of Rochester - Center for Economic Research (RCER).
    6. Ngo Long & Gerhard Sorger, 2006. "Insecure property rights and growth: the role of appropriation costs, wealth effects, and heterogeneity," Economic Theory, Springer, vol. 28(3), pages 513-529, 08.
    7. Sundaram, Rangarajan K., 1989. "Perfect equilibrium in non-randomized strategies in a class of symmetric dynamic games," Journal of Economic Theory, Elsevier, vol. 47(1), pages 153-177, February.
    8. Engelbert J. Dockner & Kazuo Nishimura, 1999. "Transboundary Pollution in a Dynamic Game Model," The Japanese Economic Review, Japanese Economic Association, vol. 50(4), pages 443-456, December.
    9. Dutta, Prajit K & Sundaram, Rangarajan, 1992. "Markovian Equilibrium in a Class of Stochastic Games: Existence Theorems for Discounted and Undiscounted Models," Economic Theory, Springer, vol. 2(2), pages 197-214, April.
    10. Barkley Rosser, J. Jr., 2001. "Complex ecologic-economic dynamics and environmental policy," Ecological Economics, Elsevier, vol. 37(1), pages 23-37, April.
    11. Dutta, Prajit K., 1991. "What do discounted optima converge to?: A theory of discount rate asymptotics in economic models," Journal of Economic Theory, Elsevier, vol. 55(1), pages 64-94, October.
    12. Tornell, Aaron & Velasco, Andes, 1992. "The Tragedy of the Commons and Economic Growth: Why Does Capital Flow from Poor to Rich Countries?," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1208-31, December.
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