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Farsight and Myopia in a Transboundary Pollution Game

Author

Listed:
  • Hassan Benchekroun
  • Guiomar Martín-Herrán

Abstract

We study the impact of farsightedness in a transboundary pollution game; i.e. the ability of a country to forecast the relationship between current emissions and future levels of pollution and thus on future damages. We show that when all countries are farsighted their payo s are larger than when all countries are myopic. However in the case where one myopic country becomes farsighted we show that the welfare impact of farsightedness on that country is ambiguous. Farsightedness may be welfare reducing for the country that acquires it. This is due to the reaction of the other farsighted countries to that country's acquisition of farsight. The country that acquires farsight reduces its emissions while the other farsighted countries extend their emissions. The overall impact on total emissions is ambiguous.

Suggested Citation

  • Hassan Benchekroun & Guiomar Martín-Herrán, 2012. "Farsight and Myopia in a Transboundary Pollution Game," Cahiers de recherche 06-2012, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  • Handle: RePEc:mtl:montec:06-2012
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    References listed on IDEAS

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    1. Benchekroun, Hassan & Martín-Herrán, Guiomar & Taboubi, Sihem, 2009. "Could myopic pricing be a strategic choice in marketing channels? A game theoretic analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 33(9), pages 1699-1718, September.
    2. 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.
    3. Fershtman, Chaim & Kamien, Morton I, 1987. "Dynamic Duopolistic Competition with Sticky Prices," Econometrica, Econometric Society, vol. 55(5), pages 1151-1164, September.
    4. Gadi Fibich & Arieh Gavious & Oded Lowengart, 2003. "Explicit Solutions of Optimization Models and Differential Games with Nonsmooth (Asymmetric) Reference-Price Effects," Operations Research, INFORMS, vol. 51(5), pages 721-734, October.
    5. Bruce Robinson & Chet Lakhani, 1975. "Dynamic Price Models for New-Product Planning," Management Science, INFORMS, vol. 21(10), pages 1113-1122, June.
    6. Dockner Engelbert J. & Van Long Ngo, 1993. "International Pollution Control: Cooperative versus Noncooperative Strategies," Journal of Environmental Economics and Management, Elsevier, vol. 25(1), pages 13-29, July.
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    More about this item

    Keywords

    myopia; differential games; transboundary pollution;

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • Q59 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Other

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