GAME MODELS OF ENVIRONMENTAL POLICY IN AN OPEN ECONOMY

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.


Issue Date:
1995
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/28364
Total Pages:
28
JEL Codes:
D62; F13; Q28
Series Statement:
ERI Study Paper 95-11




 Record created 2017-04-01, last modified 2017-04-04

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