Stability of Climate Coalitions in a Cartel Formation Game

36 Pages Posted: 9 Oct 2003

See all articles by Michael Finus

Michael Finus

University of Stirling

Ekko van Ierland

Wageningen UR - Environmental Economics and Natural Resources Group

Rob Dellink

Wageningen UR - Environmental Economics and Natural Resources Group; Organization for Economic Co-Operation and Development (OECD)

Date Written: June 2003

Abstract

We empirically test stability of climate change coalitions with the STAbility of Coalitions model (STACO). The model comprises twelve world regions and captures important dynamic aspects of the climate change problem. We apply the stability concept of internal and external stability to a cartel formation game. It is shown that only if benefits from global abatement are sufficiently high, stable coalitions emerge, though they only marginally improve upon the Nash equilibrium. We explain this phenomenon by analyzing the individual incentive structure of all regions and relate our results to the predictions of theory. Kyoto-Protocol, Cartel formation game, Non-cooperative game theory

Keywords: International environmental agreements,

JEL Classification: C72, H41, Q25

Suggested Citation

Finus, Michael and van Ierland, Ekko C. and Dellink, Rob, Stability of Climate Coalitions in a Cartel Formation Game (June 2003). FEEM Working Paper No. 61.2003. Available at SSRN: https://ssrn.com/abstract=447461 or http://dx.doi.org/10.2139/ssrn.447461

Michael Finus

University of Stirling ( email )

Stirling, Scotland FK9 4LA
United Kingdom

Ekko C. Van Ierland (Contact Author)

Wageningen UR - Environmental Economics and Natural Resources Group ( email )

P.O. Box 8130
Wageningen, 6700 EW
Netherlands

Rob Dellink

Wageningen UR - Environmental Economics and Natural Resources Group ( email )

P.O. Box 8130
Wageningen, 6700 EW
Netherlands
+31 (0)317 4 82009 (Phone)
+31 (0)317 4 84933 (Fax)

HOME PAGE: http://www.sls.wau.nl/enr/staff/dellink/

Organization for Economic Co-Operation and Development (OECD) ( email )

Paris
France

HOME PAGE: http://www.oecd.org/env/cc/econ

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