Sudhir A. Shah, Department of Economics, Delhi School of Economics, University of Delhi, Delhi 110007, India (firstname.lastname@example.org).
A Noncooperative Quantity-Rationing Theory of Transboundary Pollution
Article first published online: 12 MAY 2010
© 2010 Wiley Periodicals, Inc.
Journal of Public Economic Theory
Volume 12, Issue 3, pages 437–470, June 2010
How to Cite
SHAH, S. A. (2010), A Noncooperative Quantity-Rationing Theory of Transboundary Pollution. Journal of Public Economic Theory, 12: 437–470. doi: 10.1111/j.1467-9779.2010.01460.x
- Issue published online: 12 MAY 2010
- Article first published online: 12 MAY 2010
- Received September 19, 2007; Accepted September 29, 2009.
We study a remedy for the problem caused by international transfrontier pollution. Our results are derived from the analysis of a noncooperative game model of the determination of emissions in a quantity-rationing setting. We model the emission capping negotiations using the best response dynamic process and provide natural conditions under which the process has a unique and globally asymptotically stable stationary point. We then analyze the link between type profiles and the stationary points of the negotiation process to derive various comparative statics results and the type-contingent ordering of emission allocations. These results are used to study the investment strategies that nations can use prior to the negotiations in order to manipulate the equilibrium emission caps.