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A Core-Theoretic Solution for the Design of Cooperative Agreements on Transfrontier Pollution

In: Public goods, environmental externalities and fiscal competition

Author

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  • Parkash Chander

    (National University of Singapore)

  • Henry Tulkens

Abstract

For a simple economic model of transfrontier pollution, widely used in theoretical studies of international treaties bearing on joint abatement, we offer in this paper a scheme for sharing national abatement costs through international financial transfers that is inspired by a classical solution concept from the theory of cooperative games—namely, the core of a game. The scheme has the following properties: total damage and abatement costs in all countries are minimized (optimality property), and no coalition or subset of countries can achieve lower total costs for its members by taking another course of action in terms of emissions or transfers, under some reasonable assumption about the reactions of those not in the coalition (core property). In the concluding section economic interpretations of the scheme are proposed, including its connection with the free riding problem.

Suggested Citation

  • Parkash Chander & Henry Tulkens, 2006. "A Core-Theoretic Solution for the Design of Cooperative Agreements on Transfrontier Pollution," Springer Books, in: Parkash Chander & Jacques Drèze & C. Knox Lovell & Jack Mintz (ed.), Public goods, environmental externalities and fiscal competition, chapter 0, pages 176-193, Springer.
    • Handle: RePEc:spr:sprchp:978-0-387-25534-7_11
    DOI: 10.1007/978-0-387-25534-7_11
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