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Climate games: Who's on first? What's on second?

Author

Listed:
  • Margaret Insley

    (Department of Economics, University of Waterloo)

  • Peter A. Forsyth

    (Cheriton School of Computer Science, University of Waterloo)

Abstract
We study three different climate change games and compare with the outcome of choices by a Social Planner. In a dynamic setting, two players choose levels of carbon emissions. Rising atmospheric carbon stocks increase average global temperature which damages player utilities. Temperature is modeled as a stochastic differential equation. We contrast the results of a Stackelberg game with a game in which both players as leaders (a Leader-Leader or Trumpian game). We also examine a game, called an Interleaved game, where there is a significant time interval between player decisions. One or both players may be better off in these alternative games compared to the Stackelberg game, depending on state variables. We conclude that it is important to consider alternate game structures in examining strategic interactions in pollution games. We also demonstrate that the Stackelberg game is the limit of the Interleaved game as the time between decisions goes to zero.

Suggested Citation

  • Margaret Insley & Peter A. Forsyth, 2018. "Climate games: Who's on first? What's on second?," Working Papers 1804, University of Waterloo, Department of Economics, revised 05 2018.
    • Handle: RePEc:wat:wpaper:1804
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    References listed on IDEAS

    as
    1. Margaret Insley & Tracy Snoddon & Peter A. Forsyth, 2018. "Strategic interactions and uncertainty in decisions to curb greenhouse gas emissions," Working Papers 1805, University of Waterloo, Department of Economics, revised 06 Jan 2018.
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    1. Margaret Insley & Tracy Snoddon & Peter A. Forsyth, 2018. "Strategic interactions and uncertainty in decisions to curb greenhouse gas emissions," Working Papers 1805, University of Waterloo, Department of Economics, revised 06 Jan 2018.

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    More about this item

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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