IDEAS home Printed from https://ideas.repec.org/p/lan/wpaper/68684722.html
   My bibliography  Save this paper

Coarse correlated equilibria in an abatement game

Author

Listed:
  • Herve Moulin
  • Indrajit Ray
  • Sonali Sen Gupta

Abstract

We consider the well-analyzed abatement game (Barrett 1994) and prove that correlation among the players (nations) can strictly improve upon the Nash equilibrium payoffs. As these games are potential games, correlated equilibrium — CE — (Aumann 1974, 1987) cannot improve upon Nash; however we prove that coarse correlated equilibria — CCE — (Moulin and Vial 1978) may do so. We compute the largest feasible total utility and hence the efficiency gain in any CCE in those games: it is achieved by a lottery over only two pure strategy profiles.

Suggested Citation

  • Herve Moulin & Indrajit Ray & Sonali Sen Gupta, 2014. "Coarse correlated equilibria in an abatement game," Working Papers 68684722, Lancaster University Management School, Economics Department.
    • Handle: RePEc:lan:wpaper:68684722
    as

    Download full text from publisher

    File URL: http://www.lancaster.ac.uk/media/lancaster-university/content-assets/documents/lums/economics/working-papers/CoarseCorrelatedEquilibria.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Michael Finus & Alejandro Caparrós (ed.), 2015. "Game Theory and International Environmental Cooperation," Books, Edward Elgar Publishing, number 15345.
    2. Aumann, Robert J, 1987. "Correlated Equilibrium as an Expression of Bayesian Rationality," Econometrica, Econometric Society, vol. 55(1), pages 1-18, January.
    3. Aumann, Robert J., 1974. "Subjectivity and correlation in randomized strategies," Journal of Mathematical Economics, Elsevier, vol. 1(1), pages 67-96, March.
    4. Young, H. Peyton, 2004. "Strategic Learning and its Limits," OUP Catalogue, Oxford University Press, number 9780199269181.
    5. Moulin, Herve & Ray, Indrajit & Sen Gupta, Sonali, 2014. "Improving Nash by coarse correlation," Journal of Economic Theory, Elsevier, vol. 150(C), pages 852-865.
    6. Carlo Carraro & Valentina Bosetti & 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 approach using the WITCH Model," Working Papers 2009_28, Department of Economics, University of Venice "Ca' Foscari".
    7. Matthew McGinty, 2007. "International environmental agreements among asymmetric nations," Oxford Economic Papers, Oxford University Press, vol. 59(1), pages 45-62, January.
    8. 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.
    9. Baliga, Sandeep & Maskin, Eric, 2003. "Mechanism design for the environment," Handbook of Environmental Economics, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 1, chapter 7, pages 305-324, Elsevier.
    10. Indrajit Ray & Sonali Gupta, 2013. "Coarse correlated equilibria in linear duopoly games," International Journal of Game Theory, Springer;Game Theory Society, vol. 42(2), pages 541-562, May.
    11. Indrajit Ray & Sonali Gupta, 2013. "Coarse correlated equilibria in linear duopoly games," International Journal of Game Theory, Springer;Game Theory Society, vol. 42(2), pages 541-562, May.
    12. 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.
    13. Bosetti, Valentina & Carraro, Carlo & De Cian, Enrica & Duval, Romain & Massetti, Emanuele & Tavoni, Massimo, 2009. "The Incentives to Participate in, and the Stability of, International Climate Coalitions: A Game-theoretic Analysis Using the Witch Model," Sustainable Development Papers 54281, Fondazione Eni Enrico Mattei (FEEM).
    14. Barrett, Scott, 2001. "International cooperation for sale," European Economic Review, Elsevier, vol. 45(10), pages 1835-1850, December.
    15. Nick Hanley & Henk Folmer (ed.), 1998. "Game Theory and the Environment," Books, Edward Elgar Publishing, number 1083.
    16. Barrett, Scott, 1994. "Self-Enforcing International Environmental Agreements," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 878-894, Supplemen.
    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. TULKENS, Henry, 1998. "Cooperation versus free-riding in international environmental affairs: two approaches," LIDAM Reprints CORE 1339, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    19. 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.
    20. Aurélie Slechten, 2020. "Environmental Agreements under Asymmetric Information," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 7(3), pages 455-481.
    21. Liu, Luchuan, 1996. "Correlated Equilibrium of Cournot Oligopoly Competition," Journal of Economic Theory, Elsevier, vol. 68(2), pages 544-548, February.
    22. Gerard-Varet, L. A. & Moulin, H., 1978. "Correlation and duopoly," Journal of Economic Theory, Elsevier, vol. 19(1), pages 123-149, October.
    23. 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.
    24. 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.
    25. Peter Wood, 2010. "Climate Change and Game Theory," Environmental Economics Research Hub Research Reports 1062, Environmental Economics Research Hub, Crawford School of Public Policy, The Australian National University.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ferenc Forgó, 2020. "Exact enforcement value of soft correlated equilibrium for generalized chicken and prisoner’s dilemma games," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 28(1), pages 209-227, March.
    2. Arsen Palestini & Ilaria Poggio, 2015. "A Bayesian potential game to illustrate heterogeneity in cost/benefit characteristics," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 62(1), pages 23-39, March.
    3. Moulin, Herve & Ray, Indrajit & Sen Gupta, Sonali, 2014. "Improving Nash by coarse correlation," Journal of Economic Theory, Elsevier, vol. 150(C), pages 852-865.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Trivikram Dokka Venkata Satyanaraya & Herve Moulin & Indrajit Ray & Sonali Sen Gupta, 2019. "Improving Abatement Levels and Welfare by Coarse Correlation in an Environmental Game," Working Papers 266042710, Lancaster University Management School, Economics Department.
    2. Trivikram Dokka Venkata Satyanaraya & Herve Moulin & Indrajit Ray & Sonali Sen Gupta, 2020. "Equilibrium Design by Coarse Correlation in Quadratic Games," Working Papers 301895429, Lancaster University Management School, Economics Department.
    3. Trivikram Dokka & Hervé Moulin & Indrajit Ray & Sonali SenGupta, 2023. "Equilibrium design in an n-player quadratic game," Review of Economic Design, Springer;Society for Economic Design, vol. 27(2), pages 419-438, June.
    4. Moulin, Herve & Ray, Indrajit & Sen Gupta, Sonali, 2014. "Improving Nash by coarse correlation," Journal of Economic Theory, Elsevier, vol. 150(C), pages 852-865.
    5. Konstantinos Georgalos & Indrajit Ray & Sonali SenGupta, 2020. "Nash versus coarse correlation," Experimental Economics, Springer;Economic Science Association, vol. 23(4), pages 1178-1204, December.
    6. Ozdogan, Ayca & Saglam, Ismail, 2021. "Correlated equilibrium under costly disobedience," Mathematical Social Sciences, Elsevier, vol. 114(C), pages 98-104.
    7. Indrajit Ray & Sonali Gupta, 2013. "Coarse correlated equilibria in linear duopoly games," International Journal of Game Theory, Springer;Game Theory Society, vol. 42(2), pages 541-562, May.
    8. Georgalos, Konstantinos & Ray, Indrajit & Gupta, Sonali Sen, 2019. "Nash vs. Coarse Correlation," Cardiff Economics Working Papers E2019/3, Cardiff University, Cardiff Business School, Economics Section.
    9. Indrajit Ray & Sonali Sen Gupta, 2012. "Coarse correlated Equilibria in Linear Duopoly Games," Discussion Papers 11-14rr, Department of Economics, University of Birmingham.
    10. Grant, Simon & Stauber, Ronald, 2022. "Delegation and ambiguity in correlated equilibrium," Games and Economic Behavior, Elsevier, vol. 132(C), pages 487-509.
    11. Konstantinos Georgalos & Indrajit Ray & Sonali Sen Gupta, 2017. "Coarse correlation and coordination in a game," Working Papers 151235570, Lancaster University Management School, Economics Department.
    12. Alejandro Caparrós & Michael Finus, 2020. "Public good agreements under the weakest‐link technology," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(3), pages 555-582, June.
    13. Finus, Michael & Pintassilgo, Pedro, 2013. "The role of uncertainty and learning for the success of international climate agreements," Journal of Public Economics, Elsevier, vol. 103(C), pages 29-43.
    14. Effrosyni Diamantoudi & Eftichios S. Sartzetakis, 2018. "International Environmental Agreements—The Role of Foresight," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 71(1), pages 241-257, September.
    15. Irene Alvarado-Quesada & Hans-Peter Weikard, 2017. "International Environmental Agreements for biodiversity conservation: a game-theoretic analysis," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 17(5), pages 731-754, October.
    16. Michael Finus & Pedro Pintassilgo, 2012. "International environmental agreements under uncertainty: does the 'veil of uncertainty' help?," Oxford Economic Papers, Oxford University Press, vol. 64(4), pages 736-764, October.
    17. Achim Hagen & Klaus Eisenack, 2015. "International Environmental Agreements with Asymmetric Countries: Climate Clubs vs. Global Cooperation," Working Papers 2015.58, Fondazione Eni Enrico Mattei.
    18. Fuentes-Albero, Cristina & Rubio, Santiago J., 2010. "Can international environmental cooperation be bought?," European Journal of Operational Research, Elsevier, vol. 202(1), pages 255-264, April.
    19. Erik Ansink & Cees A. Withagen, 2016. "Members, Joiners, Free-Riders, Supporters," CESifo Working Paper Series 5802, CESifo.
    20. Lassi Ahlvik & Yulia Pavlova, 2013. "A Strategic Analysis of Eutrophication Abatement in the Baltic Sea," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 56(3), pages 353-378, November.

    More about this item

    Keywords

    Abatement game; Coarse correlated equilibrium; Efficiency gain;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:lan:wpaper:68684722. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Giorgio Motta (email available below). General contact details of provider: https://edirc.repec.org/data/delanuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.