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Game Theory and International Environmental Cooperation

New Horizons in Environmental Economics series
Michael Finus, Professor, Chair in Environmental Economics at the University of Bath, UK
The book investigates various strategies to provide countries with an incentive to accede, agree and comply to an international environmental agreement (IEA). Finus shows that by integrating real world restrictions into a model, game theory is a powerful tool for explaining the divergence between ‘first-best’ policy recommendations and ‘second-best’ designs of actual IEAs. For instance he explains why (inefficient) uniform emission reduction quotas have played such a prominent role in past IEAs despite economists’ recommendations for the use of (efficient) market-based instruments as for example emission targets and permits. Moreover, it is stated, that a single, global IEA on climate is not necessarily the best strategy and small coalitions may enjoy a higher stability and may achieve more.
Extent: 432 pp
Hardback Price: £107.00 Online: £96.30
Publication Date: 2001
ISBN: 978 1 84064 408 1
Availability: In Stock
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  • Economics and Finance
  • Environmental Economics
  • Game Theory
  • Environment
  • Environmental Economics
Since there is no supranational institution which can enforce international environmental agreements (IEAs), international cooperation proves difficult in practice. Global emissions exhibit negative externalities in countries other than that of their origin and hence there is a high interdependence between countries, and strategic considerations play an important role. Game theory analyses the interaction between agents and formulates hypotheses about their behavior and the final outcomes in games. Hence, international environmental problems are particularly suited for analysis by this method.

The book investigates various strategies to provide countries with an incentive to accede, agree and comply to an international environmental agreement (IEA). Finus shows that by integrating real world restrictions into a model, game theory is a powerful tool for explaining the divergence between ‘first-best’ policy recommendations and ‘second-best’ designs of actual IEAs. For instance he explains why (inefficient) uniform emission reduction quotas have played such a prominent role in past IEAs despite economists’ recommendations for the use of (efficient) market-based instruments as for example emission targets and permits. Moreover, it is stated, that a single, global IEA on climate is not necessarily the best strategy and small coalitions may enjoy a higher stability and may achieve more.

This book will be of great interest to scholars, researchers and lecturers in the fields of international environmental economics, game theory and international relations.
‘Finus develops the important insights of game theory for understanding international environmental problems in a rigorous yet accessible manner. The book is extremely comprehensive, and will take readers should they choose to a high level of sophistication. However, Finus also places great emphasis on pointing out the intuition behind results, and this is very welcome. All in all, this is a book which many environmental economists will want on their bookshelves.’
– Nick Hanley, University of Glasgow, UK
Contents: 1. Introduction 2. Important Terms, Notation and Classification of Games 3. Static Games with Discrete Strategy Space 4. Finite Dynamic Games with Discrete Strategy Space: A First Approach 5. Infinite Dynamic Games with Discrete Strategy Space: A First Approach 6. Finite Dynamic Games with Discrete Strategy Space: A Second Approach 7. Infinite Dynamic Games with Discrete Strategy Space: A Second Approach 8. Issue Linkage 9. Static Games with Continuous Strategy Space: Global Emission Game 10. Finite Dynamic Games with Continuous Strategy Space and Static Representations of Dynamic Games 11. Bargaining over a Uniform Emission Reduction Quota and a Uniform Emission Tax 12. Infinite Dynamic Games with Continuous Strategy Space 13. Coalition Models: A First Approach 14. Coalition Models: A Second Approach 15. Coalition Models: A Third Approach 16. Summary and Conclusions Appendices References Index