Optimal coalition splitting with heterogenous strategies

Raouf Boucekkine (), Carmen Camacho (), Weihua Ruan and Benteng Zou
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Carmen Camacho: PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Weihua Ruan: Purdue University Northwest

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Abstract: Purpose – The authors characterize the conditions under which a country may eventually split and when it splits within an infinite horizon multi-stage differential game. Design/methodology/approach – In contrast to the existing literature, the authors do not assume that after splitting, players will adopt Markovian strategies. Instead, the authors assume that while the splitting country plays Markovian, the remaining coalition remains committed to the collective control of pollution and plays open-loop. Findings – Within a full linear-quadratic model, the authors characterize the optimal strategies. The authors later compare with the outcomes of the case where the splitting country and the remaining coalition play both Markovian. The authors highlight several interesting results in terms of the implications for long-term pollution levels and the duration of coalitions under heterogenous strategies as compared to Markovian behavior. Originality/value – In this paper, the authors have illustrated the richness of the simplications of enlarging the set of strategies in terms of the emergence of coalitions, their duration and the implied welfare levels per player. Varying only three parameters (the technological gap, pollution damage and coalition payoff share distribution across players), the authors have been able to generate, among other findings, quite different rankings of welfare per player depending on whether the remaining coalitions after split play Markovian or stay precommited to the pre-splitting period decisions

Keywords: Coalition splitting; Environmental agreements; Differential games; Multistage optimal control; Precommitment vs Markovian (search for similar items in EconPapers)
Date: 2023-12
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Published in Fulbright Review of Economics and Policy, 2023, 3 (2), pp.184-202. ⟨10.1108/FREP-05-2023-0021⟩

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Related works:
Working Paper: Optimal coalition splitting with heterogenous strategies (2023)
Working Paper: Optimal coalition splitting with heterogenous strategies (2022)
Working Paper: Optimal coalition splitting with heterogenous strategies (2022)
Working Paper: Optimal coalition splitting with heterogenous strategies (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-04353691

DOI: 10.1108/FREP-05-2023-0021

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