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The Acid Rain Differential Game

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  • Karl-Göran Mäler
  • Aart De Zeeuw

    ()

Abstract

This paper considers an acid rain differential game. Countries emit sulphur which is partly transferred to other countries. Depositions above critical loads ultimately destroy the soil. Countries face a trade-off between the costs of emission reductions and the damage to the soil due to the depletion of the acid buffers. Because of the transboundary externalities the outcome will depend on whether the countries cooperate or not. This paper presents the cooperative outcome and the open-loop and Markov-perfect Nash equilibria of the acid rain differential game. It will be shown that the depositions always converge to the critical loads but the steady-state levels of the buffer stocks differ. The theory is used to analyse the acid rain differential game for sulphur between Great Britain and Ireland. Finally, some results are given for the whole of Europe. Copyright Kluwer Academic Publishers 1998

Suggested Citation

  • Karl-Göran Mäler & Aart De Zeeuw, 1998. "The Acid Rain Differential Game," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 12(2), pages 167-184, September.
    • Handle: RePEc:kap:enreec:v:12:y:1998:i:2:p:167-184
    DOI: 10.1023/A:1008273509255
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    References listed on IDEAS

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    1. Tsutsui, Shunichi & Mino, Kazuo, 1990. "Nonlinear strategies in dynamic duopolistic competition with sticky prices," Journal of Economic Theory, Elsevier, vol. 52(1), pages 136-161, October.
    2. Drew Fudenberg & Eric Maskin, 2008. "The Folk Theorem In Repeated Games With Discounting Or With Incomplete Information," World Scientific Book Chapters, in: A Long-Run Collaboration On Long-Run Games, chapter 11, pages 209-230, World Scientific Publishing Co. Pte. Ltd..
    3. Gaitsgory, Vladimir & Nitzan, Shmuel, 1994. "A folk theorem for dynamic games," Journal of Mathematical Economics, Elsevier, vol. 23(2), pages 167-178, March.
    4. Dockner Engelbert J. & Van Long Ngo, 1993. "International Pollution Control: Cooperative versus Noncooperative Strategies," Journal of Environmental Economics and Management, Elsevier, vol. 25(1), pages 13-29, July.
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    Keywords

    acid rain; critical loads; differential games;

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