An integral transformation approach to differential games: a climate model application

Raouf Boucekkine (), Giorgio Fabbri, Salvatore Federico, Fausto Gozzi, Ted Loch-Temzelides and Cristiano Ricci
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Salvatore Federico: Dipartimento di Matematica, Universit` a di Bologna, Bologna, Italy
Fausto Gozzi: Dipartimento di Economia e Finanza, Libera Universit` a Internazionale degli Studi Sociali ”Guido Carli”, Rome, Italy
Ted Loch-Temzelides: 5Rice University, Houston, USA
Cristiano Ricci: Universita di Pisa, Italy
Authors registered in the RePEc Author Service: Ted LOCH TEMZELIDES

No 2025001, LIDAM Discussion Papers IRES from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: We develop an Integral Transformation Method (ITM) for the study of suitable optimal control and differential game models. This allows for a solution to such dynamic problems to be found through solving a family of optimization problems parametrized by time. The method is quite flexible, and it can be used in several economic applications where the state equation and the objective functional are linear in a state variable. We illustrate the ITM in the context of a two-country integrated assessment climate model. We characterize emissions, consumption, transfers, and welfare by computing the Nash equilibria of the associated dynamic game. We then compare them to efficiency benchmarks. Further, we apply the ITM in a robust control setup, where we investigate how (deep) uncertainty affects climate outcomes.

Keywords: Integral Transformation Method; Analytical integrated assessment model; differential game; climate policy; robust control (search for similar items in EconPapers)
JEL-codes: C7 D62 H23 Q5 Q54 (search for similar items in EconPapers)
Date: 2025-01-02
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Working Paper: An integral transformation approach to differential games: a climate model application (2025)
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