Pollution Permit Sharing Games

Sang-Chul Suh () and Yuntong Wang ()
Additional contact information
Sang-Chul Suh: Department of Economics, University of Windsor
Yuntong Wang: Department of Economics, University of Windsor

No 1604, Working Papers from University of Windsor, Department of Economics

Abstract: We consider a pollution permit sharing problem in which a ?nite number of countries, each identi?ed by a unique technology that transforms the pollution permits into an output, share a given amount of permits. We de?ne a Pollution Permit Sharing (PPS) game that assigns to each coalition of countries the maximal value of output they can generate collectively with their technologies and permits available to them. We show that the game is totally balanced. We also show that, for the well-known Cap and Trade (CAT) mechanism, namely the competitive equilibrium allocation which generates an efficient allocation of the permits, its corresponding (net) output distribution is in the core of the PPS game. We consider two other coalitional games whose de?nitions depend on the availability of either the total permits or the technologies. The Aspiration Upper Bound with given Permits (AUBP) game assigns to each coalition the maximal value they can generate by using the technologies available from all countries, but only with the permits available to the coalition. And the Aspiration Upper Bound with given Technologies (AUBT) game assigns to each coalition the maximal value they can generate using only the technolo-gies available to the coalition with the permits available from all countries. We show that the core of the AUBP game is nonempty. More importantly, we show that the competitive equilibrium allocation violates the above two aspiration upper bound restrictions. Finally, we suggest the Shapley value as one of the possible alternative solutions to the permit sharing problem.

Keywords: Pollution Permits; Cap and Trade; Cooperative Games; Aspiration Upper Bounds. (search for similar items in EconPapers)
JEL-codes: C71 D60 Q20 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2016-05-03
New Economics Papers: this item is included in nep-ene, nep-env, nep-gth and nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://web2.uwindsor.ca/economics/RePEc/wis/pdf/1604.pdf First version, 2016 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wis:wpaper:1604

Access Statistics for this paper

More papers in Working Papers from University of Windsor, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Christian Trudeau ().