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The benefits of international cooperation under climate uncertainty: a dynamic game analysis

Published online by Cambridge University Press:  10 April 2018

Xiao-Bing Zhang  and
Magnus Hennlock
Xiao-Bing Zhang*
Affiliation:
School of Economics, Renmin University of China, Beijing, China
Magnus Hennlock
Affiliation:
IVL Swedish Environmental Research Institute, Gothenburg, Sweden Department of Economics and StatisticsUniversity of Gothenburg, Gothenburg, Sweden
*
*Corresponding author. E-mail: xbzhmail@gmail.com
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Abstract

This paper investigates the benefits of international cooperation under uncertainty about global warming through a stochastic dynamic game. We analyze the benefits of cooperation both for the case of symmetric and asymmetric players. It is shown that the players’ combined expected payoffs decrease as climate uncertainty becomes larger, whether or not they cooperate. However, the benefits from cooperation increase with climate uncertainty. In other words, it is more important to cooperate when facing higher uncertainty. At the same time, more transfers will be needed to ensure stable cooperation among asymmetric players.

Keywords

Climate changecooperationdifferential gameuncertainty

JEL classification

Q54: Climate • Natural Disasters and Their Management • Global Warming C73: Stochastic and Dynamic Games • Evolutionary Games • Repeated Games C61: Optimization Techniques • Programming Models • Dynamic Analysis
Type
Research Article
Information
Environment and Development Economics , Volume 23 , Issue 4 , August 2018 , pp. 452 - 477
Copyright
Copyright © Cambridge University Press 2018 

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