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Controlling the international stock pollutant with policies depending on target values

  • Omar J. Casas

    ()

  • Rosario Romera

    ()

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    In this paper a stochastic dynamic game formulation of the economics of international environmental agreements on the transnational pollution control, when the environmental damage arises from stock pollutant that accumulates, for accumulating pollutants such as CO2 in the atmosphere is provided. To improve the non-cooperative equilibrium among countries, we propose a different criterion to the minimization of the expected discounted total cost. Moreover, we consider Cooperative versus Noncooperative Stochastic Dynamic Games formulated as Markov Decision Processes (MDP). We propose a new alternative where the decision-maker wants to maximize the probability that some total performance of the dynamical game does not exceed a target value during a fixed period of time. The task requirements are therefore formulated as probabilities rather than expectations. This approach is different from the standard MDP, which uses performance criteria based on the expected value of some index. We present properties of the optimal policies obtained under this new perspective.

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    File URL: http://e-archivo.uc3m.es/bitstream/10016/5736/1/ws096019.pdf
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    Paper provided by Universidad Carlos III, Departamento de Estadística y Econometría in its series Statistics and Econometrics Working Papers with number ws096019.

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    Date of creation: Sep 2009
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    Handle: RePEc:cte:wsrepe:ws096019
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    1. Santiago Rubio & Begoña Casino, 2005. "Self-enforcing international environmental agreements with a stock pollutant," Spanish Economic Review, Springer, vol. 7(2), pages 89-109, 06.
    2. Chander, Parkash & Tulkens, Henry, 1994. "A Core-Theoretic Solution for the Design of Cooperative Agreements on Transfrontier Pollution," Working Papers 897, California Institute of Technology, Division of the Humanities and Social Sciences.
    3. Carlo Carraro & Johan Eyckmans & Michael Finus, 2006. "Optimal transfers and participation decisions in international environmental agreements," The Review of International Organizations, Springer, vol. 1(4), pages 379-396, December.
    4. Van Der Ploeg, F. & De Zeeuw, A.J., 1990. "International Aspects Of Pollution Control," Papers 9065, Tilburg - Center for Economic Research.
    5. Chander, Parkash & Tulkens, Henry, 1994. "The Core of an Economy With Multilateral Environmental Externalities," Working Papers 886, California Institute of Technology, Division of the Humanities and Social Sciences.
    6. Keller, Klaus & Bolker, Benjamin M. & Bradford, D.F.David F., 2004. "Uncertain climate thresholds and optimal economic growth," Journal of Environmental Economics and Management, Elsevier, vol. 48(1), pages 723-741, July.
    7. GERMAIN, Marc & TOINT, Philippe & TULKENS, Henry & DE ZEEUW, Aart, . "Transfers to sustain dynamic core-theoretic cooperation in international stock pollutant control," CORE Discussion Papers RP -1637, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    8. Germain, M. & Toint, Ph. & Tulkens, H. & de Zeeuw, A.J., 2003. "Transfers to sustain dynamic core-theoretic cooperation in international stock pollutant control," Other publications TiSEM 8953bc6e-fc65-4fd7-a2d1-6, Tilburg University, School of Economics and Management.
    9. Eyckmans, Johan & Tulkens, Henry, 2003. "Simulating coalitionally stable burden sharing agreements for the climate change problem," Resource and Energy Economics, Elsevier, vol. 25(4), pages 299-327, October.
    10. Dechert, W.D. & O'Donnell, S.I., 2006. "The stochastic lake game: A numerical solution," Journal of Economic Dynamics and Control, Elsevier, vol. 30(9-10), pages 1569-1587.
    11. Petrosjan, Leon & Zaccour, Georges, 2003. "Time-consistent Shapley value allocation of pollution cost reduction," Journal of Economic Dynamics and Control, Elsevier, vol. 27(3), pages 381-398, January.
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