THE DYNAMIC GLOBAL EXTERNALITY GAME

Henry Tulkens

Chapter 7 in Economics, Game Theory and International Environmental Agreements:The Ca' Foscari Lectures, 2019, pp 227-287 from World Scientific Publishing Co. Pte. Ltd.

Abstract: The following sections are included:The purpose and the messageThe dynamic economic-ecological reference modelComponents of the systemTime and commoditiesProductionUtilities and discountingDisutility of a stock or of a flow?Feasible pathsSteady statesIntertemporal equilibriaIndividual behavior of a country over timeFirst-order conditionsStandard economic properties of an individual equilibrium over timeOther general properties of an individual equilibrium over timeTime profile of the emissions along individual equilibrium pathInternational equilibrium over timeStandard economic properties of the international equilibrium over timeOther general properties of the international equilibrium over timeTime profile of the stock along the international equilibrium pathIntertemporal international efficiencyFirst-order conditionsStandard economic properties of an efficient pathOther general properties of an efficient stateMultiple efficient outcomesTime profiles of the emissions and the stock along the efficient pathThe rationale for cooperation in the dynamic settingThe associated dynamic global externality gameFormulation of the dynamic global externality game (DGEG)Antecedents and alternative categories of dynamic gamesEquilibrium concepts in the DGEGNon-cooperative Nash equilibrium pathsExistence and uniquenessOther properties of the non-cooperative Nash equilibrium pathLinear damage functions: Equilibrium in dominant strategiesCoalitions and utilitiesCoalitionsTransferability of utilitiesPaths of partially cooperative Nash equilibriaExistence and uniquenessBehavioral economic and environmental characteristicsCoalitional functions, efficient and alternative cooperative pathsThe γ-coalitional function, the efficient path, and the imputations setAlternative cooperative pathsThe γ-core stable path of the DGEG: Optimal control formulationThe optimal control approachCritical evaluationEconomic considerationsGame theoretic considerationsThe γ-core stable path as a sequence of negotiations: Dynamic programming formulationThe GTTZ alternative approachThe issue of cooperation vs. non-cooperation in an intertemporal contextState variables and value functions: dynamic programming in lieu of optimal controlThe fallback position and the Houba-de Zeeuw assumption on expectationsRational expectations games: introducing the conceptThe argument in general terms and existenceThe cooperative solution of the dynamic global environmental gameDefinition and existenceComputing the solution by backward induction — Linear damage functionsThe infinite horizon caseConcluding considerations

Keywords: Environmental Economics; Environmental Externalities; Climate Change; Game Theory; γ-core; Dynamic Games; International Agreements; UNFCCC Process; Kyoto Protocol (search for similar items in EconPapers)
JEL-codes: Q50 (search for similar items in EconPapers)
Date: 2019
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