Differential Game Approach for International Environmental Agreements with Social Externalities

Lina Mallozzi (), Stefano Patri () and Armando Sacco ()
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Lina Mallozzi: University of Naples Federico II, Faculty of Economics, Naples, Italy
Stefano Patri: University of Rome I, Rome, Italy
Armando Sacco: University of Rome I, Rome, Italy

Czech Economic Review, 2015, vol. 9, issue 3, 135-154

Abstract: In this work we study an N-player differential game, in which positive social externalities affect the payoffs of the players when they make an agreement. We divide the N players in two homogeneous groups, N1 developed countries and N2 developing countries. For the latter, we consider a damage-cost function that evolves in time. We imagine the externalities as the possibility that bilateral or multilateral agreements of various nature are by-products of an International Environmental Agreement (IEA). After the determination of emissions solutions, we use the externalities to investigate whether it is possible to have a self-enforcing agreement on pollution emissions in the short run.

Keywords: Differential game; self-enforcing agreement; social externality; asymmetric players (search for similar items in EconPapers)
JEL-codes: C72 C73 (search for similar items in EconPapers)
Date: 2015
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