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Stability of Climate Coalitions in a Cartel Formation Game

  • Michael Finus

    ()

  • Ekko Ierland
  • Rob Dellink

We empirically test stability of climate change coalitions with the STAbility of Coalitions model (STACO). The model comprises twelve world regions and captures important dynamic aspects of the climate change problem. We apply the stability concept of internal and external stability to a cartel formation game. It is shown that only if benefits from global abatement are sufficiently high, stable coalitions emerge, though they only marginally improve upon the Nash equilibrium. We explain this phenomenon by analyzing the individual incentive structure of all regions and relate our results to the predictions of theory.

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File URL: http://hdl.handle.net/10.1007/s10101-005-0009-1
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Article provided by Springer in its journal Economics of Governance.

Volume (Year): 7 (2006)
Issue (Month): 3 (August)
Pages: 271-291

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Handle: RePEc:spr:ecogov:v:7:y:2006:i:3:p:271-291
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  15. EYCKMANS, Johan & TULKENS, Henry, . "Simulating coalitionally stable burden sharing agreements for the climate change problem," CORE Discussion Papers RP -1677, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  16. Barbara Buchner & Carlo Carraro & Igor Cersosimo & Carmen Marchiori, 2002. "Back to Kyoto? US Participation and the Linkage between R&D and Climate Cooperation," CESifo Working Paper Series 688, CESifo Group Munich.
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