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Abstract:
Calling upon both positive and normative economics, we attempt to characterize the issues at stake in the current international negotiations on climatic change. We begin (section 2) by reviewing the main features of the Protocol. Then (Section 3), we identify by means of an elementary economic model the main concepts involved: optimality, non cooperation, coalitional stability. We observe (Section 4) that %22business-as-usual%22, %22no regrets%22 and other domestic policies are alternative ways to conceive of the non cooperative equilibrium prevailing before the negotiations. Which one should be retained; Data suggest that the prevailing situation is a mixed one, exhibiting characteristics of several of these policies. We then turn (Section 5) to interpreting the Protocol. While there is no firm basis to assert that the emission quotas chosen at Kyoto correspond to optimal emissions (although they are a step in the right direction), economic and game theoretical arguments are put forward to support the view that for achieving these emission quotas, trading ensures efficiency, as well as coalitional stability for the agreement provided it is adopted at the largest scale i.e. worldwide. Finally, it is argued in Section 6 that beyond the Kyoto Protocol, the achievement of coalitionally stable optimality at the world level is a real possibility with trading, provided agreement can be reached in the future as to appropriate reference emission levels, in particular as far as developing countries are concerned.

Abstract:
This paper interprets the Kyoto Protocol in terms of game theory with special emphasis on its implications for developing countries. What should be the role and strategy of these countries, especially India, in its implementation and future negotiations?

Kyoto Protocol, emission caps, emission trading, developing countries

Abstract:
The paper proves the existence and uniqueness of a noncooperative steady state in the context of a model of climate change. It also explores the possibility of cooperation and attainment of an optimal steady state. It is shown that the problem is similar to that in the static model (Chander and Tulkens (1997)).

Climate change, dynamic models, steady states, optimality, cooperation

Abstract:
In essence, any international environmental agreement (IEA) implies cooperation of a form or another. The paper seeks for logical foundations of this. It first deals with how the need for cooperation derives from the public good aspect of the externalities involved, as well as with where the source of cooperation lies in cooperative game theory. In either case, the quest for efficiency is claimed to be at the root of cooperation. Next, cooperation is considered from the point of view of stability. After recalling the two competing concepts of stability in use in the IEA literature, new insights on the nature of the gamma core in general are given as well as of the Chander-Tulkens solution within the gamma core. Free riding is also evaluated in relation with the alternative forms of stability under scrutiny. Finally, it is asked whether with the often mentioned virtue of "self enforcement" any conceptual gain is achieved, different from what is meant by efficiency and stability. A skeptical answer is offered, as a reply to Barrett's (2003) attempt at giving the notion a specific content.

International Environmental Agreements, Cooperation, Stability, Self-enforcement

Abstract:
We analyze the effect of collective action by green/environmentally aware consumers on ambient environmental quality and market equilibrium. We consider a model with two types of consumers who differ in their willingness-to-pay for a good available in two different environmental qualities, and two competing firms: one selling the good of high environmental quality and the other of low environmental quality. We show that collective action by green consumers reduces competition and leads to higher prices for the good of both qualities. Though it improves the ambient environmental quality, it may reduce the welfare of both types of consumers.

green consumers, collective action, environmental quality, differentiated duopoly, firm profitability

Abstract:
This paper reinterprets the gamma-core (Chander and Tulkens (1995, 1997)) and justifies it as well as its prediction that the efficient coalition structure is stable in terms of the coalition formation theory. The problem of coalition formation is formulated as an infinitely repeated game in which the players must choose whether to cooperate or not. It is shown that a certain equilibrium of this game corresponds to the gamma-core assumption that when a coalition forms the remaining players form singletons, and that the grand coalition is an equilibrium coalition structure.

Core, Characteristic function, Strategic form games, Coalition formation

Abstract:
This paper characterizes the optimal income tax function when the agent is risk averse and the objective of the principal is to maximize a social welfare function. We show that the optimal tax function is generally non-decreasing and concave if the principal's objective is maximin and the agent's utility function satisfies a reasonable condition which we call 'repetitive risk aversion'. It is shown further that in many cases the optimal tax function is similarly concave when the social welfare function is utilitarian.

Abstract:
This paper characterizes the optimal income tax function when the agent is risk averse and the objective of the principal is to maximize a social welfare function. We show that the optimal tax function is generally non-decreasing and concave if the principal's objective is maximin and the agent's utility function satisfies a reasonable condition that we call repetitive risk aversion. It is shown further that in many cases the optimal tax function is similarly concave when the social welfare function is utilitarian.

tax enforcement, auditing, penalty, risk aversion, asymmetric information, principal-agent

Abstract:
This paper presents a general framework for characterizing the optimal pattern of subsidies for poverty alleviation under budgetary constraints and suggests possible reforms for the existing pattern of subsidies. The government may subsidize or tax goods in order to meet its objectives. The paper introduces the concept of a consumer equilibrium and shows that there are cases of equilibria in which reforms can generate not only fiscal savings but also Pareto improve the welfare of both poor and wealthy consumers.

poverty, subsidy, reforms, quality, deadweight loss

Abstract:
We propose a reasonable condition, which we call repetitive risk aversion, to be imposed on any utility function to account for the observed data on the relationship between the degree of absolute risk aversion and wealth. This condition is shown to be equivalent to the behaviorally meaningful condition that the risk premium is increasing at a non-increasing rate with the size of the bet. We drive mixed risk aversion, which is known to be stronger than standard and thus proper risk aversion, from repetitive risk aversion. We present several economic applications of repetitive risk aversion to demonstrate that it delivers better comparative static results.

expected utility, risk aversion, risk premium, monotone function, multiple risks

Abstract:
When environmental externalities are international - i.e. transfrontier - they most often are multilateral and embody public good characteristics. Improving upon inefficient laissez-faire equilibria requires voluntary cooperation for which the game-theoretic core concept provides optimal outcomes that have interesting properties against free riding. To define the core, however, the characteristic function of the game associated with the economy (which specifies the payoff achievable by each possible coalition of players - here, the countries) must also reflect in each case the behaviour of the players which are not members of the coalition. This has been for a long time a disputed issue in the theory of the core of economies with externalities. Among the several assumptions that can be made to this behaviour, a plausible one is defined in this paper, for which it is shown that the core of the game is nonempty. The proof is constructivein the sense that it exhibits a strategy (specifying an explicit coordinated abatement policy and including financial transfers) that has the desired property of nondomination by any proper coalition of countries, given, the assumed behaviour of the other countries. This strategy is also shown to have an equilibrium interpretation in the economic model.