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Game models of environmental policy in an open economy

Author

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  • Amitrajeet A. Batabyal

    (Department of Economics, Utah State University, Logan, UT 84322-3530, USA)

Abstract

In this paper we study some aspects of the question of international environmental regulation from a game theoretic perspective. We address two broad questions. First, we examine the circumstances under which the pursuit of unilateral environmental policy by a country in a Stackelberg game, will make that country worse off. Second, we study the effects of environmental regulation by means of alternate price control instruments in a Stackelberg game when there is transboundary pollution. We find that there are plausible theoretical circumstances in which the pursuit of unilateral environmental policy is not a good idea. Further, we show that in choosing between alternate pollution control instruments, national governments typically face a tradeoff between instruments which correct more distortions but are costly to implement and instruments which correct fewer distortions but are less costly to implement. In particular, we obtain a dominance result for a tariff policy; this result favors the use of tariffs from an informational standpoint alone.

Suggested Citation

  • Amitrajeet A. Batabyal, 1996. "Game models of environmental policy in an open economy," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 30(2), pages 185-200.
  • Handle: RePEc:spr:anresc:v:30:y:1996:i:2:p:185-200
    Note: Received: January 1995 / Accepted: September 1995
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    References listed on IDEAS

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    1. Markusen James R. & Morey Edward R. & Olewiler Nancy D., 1993. "Environmental Policy when Market Structure and Plant Locations Are Endogenous," Journal of Environmental Economics and Management, Elsevier, vol. 24(1), pages 69-86, January.
    2. McGuire, Martin C., 1982. "Regulation, factor rewards, and international trade," Journal of Public Economics, Elsevier, vol. 17(3), pages 335-354, April.
    3. Merrifield, John D., 1988. "The impact of selected abatement strategies on transnational pollution, the terms of trade, and factor rewards: A general equilibrium approach," Journal of Environmental Economics and Management, Elsevier, vol. 15(3), pages 259-284, September.
    4. Markusen, James R., 1975. "International externalities and optimal tax structures," Journal of International Economics, Elsevier, vol. 5(1), pages 15-29, February.
    5. Pethig, Rudiger, 1976. "Pollution, welfare, and environmental policy in the theory of Comparative Advantage," Journal of Environmental Economics and Management, Elsevier, vol. 2(3), pages 160-169, February.
    6. Tobey, James A, 1990. "The Effects of Domestic Environmental Policies on Patterns of World Trade: An Empirical Test," Kyklos, Wiley Blackwell, vol. 43(2), pages 191-209.
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    Citations

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    Cited by:

    1. Amitrajeet A. Batabyal & Dug Man Lee, 2008. "Dynamic Environmental Policy In Developing Countries With A Dual Economy," World Scientific Book Chapters,in: Dynamic And Stochastic Approaches To The Environment And Economic Development, chapter 10, pages 165-187 World Scientific Publishing Co. Pte. Ltd..
    2. Amitrajeet Batabyal, 1994. "On the possibility of attaining environmental and trade objectives simultaneously," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 4(6), pages 545-553, December.
    3. repec:spr:anresc:v:58:y:2017:i:3:d:10.1007_s00168-017-0809-6 is not listed on IDEAS
    4. Jeroen C.J.M. van den Bergh & Peter Nijkamp, 1997. "Optimal Growth, Coordination and Sustainability in the Spatial Economy," Tinbergen Institute Discussion Papers 97-104/3, Tinbergen Institute.
    5. Batabyal, Amitrajeet A., 1995. "Development, trade, and the environment: which way now?," Ecological Economics, Elsevier, vol. 13(2), pages 83-88, May.

    More about this item

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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