Coalition Formation and Environmental Policies in International Oligopoly Markets

Michel Cavagnac () and Guillaume Cheikbossian

No 12-364, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: This paper analyzes the problem of international environmental cooperation as a coalition formation game. For this purpose, we develop a simple model with three countries of unequal size. Strate- gic interactions between those countries come from the imperfect competition among producers in global markets and from the transboundary pollution generated by the ?rms. To capture e¢ ciency gains from coordinating policies, countries can join a coalition and sign an international environmental agreement. The equilibrium coalition structure then depends on the country-size asymmetry and on the marginal environmental damage. Interestingly, we show that the grand coalition is less likely to emerge as an equi- librium outcome once two countries form a subcoalition. Furthermore, the further enlargement of the initial subcoalition can be blocked either by the outsider or by the insiders.

JEL-codes: F55 H23 (search for similar items in EconPapers)
Date: 2012-04
New Economics Papers: this item is included in nep-cdm, nep-ene, nep-env, nep-gth and nep-net
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Related works:
Working Paper: Coalition Formation and Environmental Policies in International Oligopoly Markets (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:tse:wpaper:26607

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