GAME MODELS OF ENVIRONMENTAL POLICY IN AN OPEN ECONOMY

Amitrajeet Batabyal

No 28364, Economics Research Institute, ERI Study Papers from Utah State University, Economics Department

Abstract: In this paper we study some aspects of the question of international environmental regulation from a game theoretic perspective. We address two broad questions. First, we examine the circumstances under which the pursuit of unilateral environmental policy by a country in a Stackelberg game will make that country worse off. Second, we study the effects of environmental regulation by means of alternate price control instruments in a Stackelberg game where there is transboundary pollution. We find that there are plausible theoretical circumstances in which the pursuit of unilateral environmental policy is not a good idea. Further, we show that in choosing between alternate pollution control instruments, national governments typically face a tradeoff between instruments which correct more distortions but are costly to implement and instruments which correct fewer distortions but are less costly to implement. In particular, we obtain a dominance result for a tariff policy; this result favors the use of tariffs from an informational standpoint alone. Published in Annals of Regional Science 30 (2, 1996): 185-200.

Keywords: Environmental; Economics; and; Policy (search for similar items in EconPapers)
Pages: 28
Date: 1995
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Journal Article: Game models of environmental policy in an open economy (1996)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:usuesp:28364

DOI: 10.22004/ag.econ.28364

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