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A core-theoretic solution for the design of cooperative agreements on transfrontier pollution

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  • Parkash Chander
  • Henry Tulkens

Abstract

For a simple economic model of transfrontier pollution, widely used in theoretical studies of international treaties bearing on joint abatement, we exhibit in this paper a scheme for sharing national abatement costs, through international financial transfers, which is inspired by a very classical solution concept offered in the theory of cooperative games, namely the "core" of a game. The scheme has the following properties: (i) total damage and abatement costs in all countries are minimized (optimality property), and (ii) no "coalition", Le. subset, of countries can achieve lower such total costs for its members by taking another course of action in terms of emissions and/or transfers, under some reasonable assumption as to the reactions of those not in the coalition (core property).
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Suggested Citation

  • Parkash Chander & Henry Tulkens, 1995. "A core-theoretic solution for the design of cooperative agreements on transfrontier pollution," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 2(2), pages 279-293, August.
  • Handle: RePEc:kap:itaxpf:v:2:y:1995:i:2:p:279-293
    DOI: 10.1007/BF00877502
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    References listed on IDEAS

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    1. Parkash Chander & Henry Tulkens, 2006. "The Core of an Economy with Multilateral Environmental Externalities," Springer Books, in: Parkash Chander & Jacques Drèze & C. Knox Lovell & Jack Mintz (ed.), Public goods, environmental externalities and fiscal competition, chapter 0, pages 153-175, Springer.
    2. Shapley, Lloyd S & Shubik, Martin, 1969. "On the Core of an Economic System with Externalities," American Economic Review, American Economic Association, vol. 59(4), pages 678-684, Part I Se.
    3. Scarf, Herbert E., 1971. "On the existence of a coopertive solution for a general class of N-person games," Journal of Economic Theory, Elsevier, vol. 3(2), pages 169-181, June.
    4. Partha Dasgupta & Peter Hammond & Eric Maskin, 1980. "On Imperfect Information and Optimal Pollution Control," Review of Economic Studies, Oxford University Press, vol. 47(5), pages 857-860.
    5. Foley, Duncan K, 1970. "Lindahl's Solution and the Core of an Economy with Public Goods," Econometrica, Econometric Society, vol. 38(1), pages 66-72, January.
    6. Parkash Chander & Henry Tulkens, 2006. "Theoretical Foundations of Negotiations and Cost Sharing in Transfrontier Pollution Problems," Springer Books, in: Parkash Chander & Jacques Drèze & C. Knox Lovell & Jack Mintz (ed.), Public goods, environmental externalities and fiscal competition, chapter 0, pages 123-134, Springer.
    7. Germain, Marc & Toint, Philippe & Tulkens, Henry, 1994. "Calcul économique itératif pour les négociations internationales sur les pluies acides entre la Finlande, la Russie et l'Estonie," LIDAM Discussion Papers IRES 1994017, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    8. J. H. Dreze & D. de la Vallee Poussin, 1971. "A Tâtonnement Process for Public Goods," Review of Economic Studies, Oxford University Press, vol. 38(2), pages 133-150.
    9. Evan Kwerel, 1977. "To Tell the Truth: Imperfect Information and Optimal Pollution Control," Review of Economic Studies, Oxford University Press, vol. 44(3), pages 595-601.
    10. Chander, Parkash, 1993. "Dynamic Procedures and Incentives in Public Good Economies," Econometrica, Econometric Society, vol. 61(6), pages 1341-1354, November.
    11. Carraro, Carlo & Siniscalco, Domenico, 1993. "Strategies for the international protection of the environment," Journal of Public Economics, Elsevier, vol. 52(3), pages 309-328, October.
    12. Bernheim, B. Douglas & Peleg, Bezalel & Whinston, Michael D., 1987. "Coalition-Proof Nash Equilibria I. Concepts," Journal of Economic Theory, Elsevier, vol. 42(1), pages 1-12, June.
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