Endogenous Coalition Formation in Global Pollution Control

57 Pages Posted: 4 Aug 2001

See all articles by Michael Finus

Michael Finus

University of Stirling

Bianca Rundshagen

University of Hagen

Date Written: June 2001

Abstract

We extend the work on coalition formation in global pollution control by allowing for multiple coalitions. Equilibrium coalitions are derived under different "rules of the game" and compared with each other. We consider internal & external equilibria and equilibrium binding agreements in the cartel formation game, coalition-proof and strong Nash equilibria in the open-membership game and in the exclusive membership - and - games, subgame-perfect equilibria in the sequential move unanimity game and equilibria in the equilibrium binding agreement game. We show that farsightedness and exclusive membership leads to more concentrated coalition structure, implying lower global emissions and higher global welfare. Moreover, we evaluate the different coalition formation games with respect to their ability to explain existing international environmental agreements and with respect to their theoretical consistency.

Keywords: International environmental agreements, coalition formation games, global pollution

JEL Classification: C72, Q20

Suggested Citation

Finus, Michael and Rundshagen, Bianca, Endogenous Coalition Formation in Global Pollution Control (June 2001). FEEM Working Paper No. 43.2001. Available at SSRN: https://ssrn.com/abstract=278511 or http://dx.doi.org/10.2139/ssrn.278511

Michael Finus (Contact Author)

University of Stirling ( email )

Stirling, Scotland FK9 4LA
United Kingdom

Bianca Rundshagen

University of Hagen ( email )

Profilstr. 8
Hagen, D-58084
Germany

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