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Coarse Correlated Equilibria in an Abatement Game

  • Herve Moulin
  • Indrajit Ray
  • Sonali Sen Gupta

We consider coarse correlated equilibria - CCE - (Moulin and Vial 1978) for the well-analyzed abatement game (Barrett 1994) and prove that CCE can strictly improve upon the Nash equilibrium payoffs, while correlated equilibrium - CE - (Aumann 1974, 1987) cannot, because these games are potential games. We compute the largest feasible total utility in any CCE in those games: it is achieved by a CCE involving only two pure strategy profiles, and the efficiency gain is small.

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File URL: ftp://ftp.bham.ac.uk/pub/RePEc/pdf/13-11.pdf
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Paper provided by Department of Economics, University of Birmingham in its series Discussion Papers with number 13-11.

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Length: 14 pages
Date of creation: Apr 2013
Date of revision:
Handle: RePEc:bir:birmec:13-11
Contact details of provider: Postal: Edgbaston, Birmingham, B15 2TT
Web page: http://www.economics.bham.ac.uk

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  1. Indrajit Ray & Sonali Gupta, 2013. "Coarse correlated equilibria in linear duopoly games," International Journal of Game Theory, Springer, vol. 42(2), pages 541-562, May.
  2. Sandeep Baliga & Eric Maskin, 2003. "Mechanism Design for the Environment," Levine's Working Paper Archive 506439000000000341, David K. Levine.
  3. Klepper, Gernot & Peterson, Sonja, 2006. "Marginal abatement cost curves in general equilibrium: The influence of world energy prices," Resource and Energy Economics, Elsevier, vol. 28(1), pages 1-23, January.
  4. Wood, Peter John, 2010. "Climate Change and Game Theory," Research Reports 95061, Australian National University, Environmental Economics Research Hub.
  5. Santiago J. Rubio & Alistair Ulph, 2006. "Self-enforcing international environmental agreements revisited," Oxford Economic Papers, Oxford University Press, vol. 58(2), pages 233-263, April.
  6. Robert J. Aumann, 2010. "Correlated Equilibrium as an expression of Bayesian Rationality," Levine's Working Paper Archive 661465000000000377, David K. Levine.
  7. Young, H. Peyton, 2004. "Strategic Learning and its Limits," OUP Catalogue, Oxford University Press, number 9780199269181, March.
  8. Finus, Michael, 2008. "Game Theoretic Research on the Design of International Environmental Agreements: Insights, Critical Remarks, and Future Challenges," International Review of Environmental and Resource Economics, now publishers, vol. 2(1), pages 29-67, June.
  9. Valentina Bosetti & Carlo Carraro & Enrica De Cian & Romain Duval & Emanuele Massetti & Massimo Tavoni, 2009. "The Incentives to Participate in, and the Stability of, International Climate Coalitions: A Game-theoretic Analysis Using the Witch Model," Working Papers 2009.64, Fondazione Eni Enrico Mattei.
  10. Forgo, Ferenc & Fulop, Janos & Prill, Maria, 2005. "Game theoretic models for climate change negotiations," European Journal of Operational Research, Elsevier, vol. 160(1), pages 252-267, January.
  11. Michael Finus & Juan-Carlos Altamirano-Cabrera & Ekko Ierland, 2005. "The effect of membership rules and voting schemes on the success of international climate agreements," Public Choice, Springer, vol. 125(1), pages 95-127, July.
  12. Liu, Luchuan, 1996. "Correlated Equilibrium of Cournot Oligopoly Competition," Journal of Economic Theory, Elsevier, vol. 68(2), pages 544-548, February.
  13. Barrett, Scott, 2001. "International cooperation for sale," European Economic Review, Elsevier, vol. 45(10), pages 1835-1850, December.
  14. Gerard-Varet, L. A. & Moulin, H., 1978. "Correlation and duopoly," Journal of Economic Theory, Elsevier, vol. 19(1), pages 123-149, October.
  15. Herve Moulin & Indrajit Ray & Sonali Sen Gupta, 2013. "Improving Nash by Coarse Correlation," Discussion Papers 13-10, Department of Economics, University of Birmingham.
  16. R. Aumann, 2010. "Subjectivity and Correlation in Randomized Strategies," Levine's Working Paper Archive 389, David K. Levine.
  17. Yi, Sang-Seung, 1997. "On the existence of a unique correlated equilibrium in Cournot oligopoly," Economics Letters, Elsevier, vol. 54(3), pages 235-239, July.
  18. Matthew McGinty, 2007. "International environmental agreements among asymmetric nations," Oxford Economic Papers, Oxford University Press, vol. 59(1), pages 45-62, January.
  19. Barrett, Scott, 1994. "Self-Enforcing International Environmental Agreements," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 878-94, Supplemen.
  20. Indrajit Ray & Sonali Sen Gupta, 2012. "Coarse Correlated Equilibria and Sunspots," Discussion Papers 11-14r, Department of Economics, University of Birmingham.
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