Modeling Global Environmental Issues as a Cooperative Game of Stock Externality Provisions
Modeling Global Environmental Issues as a Cooperative Game of Stock Externality Provisions
One of the aims of this study is to bridge the gap between integrated assessment and game theoretic modeling. Within the framework of the RICE (Regional Integrated model of Climate and the Economy) model, this chapter examines various strategic and coalitional issues by seeking game-theoretic solutions of the model in this research. The framework of stock externality provision is formulated as a social planner’s optimal control problem. Climate change is a special application for the general formulation. A cooperative game of providing stock externality is then constructed as a bargaining process for shares in social welfare weights. Preparatory definitions and game-theoretic solutions in the context of the optimal control setting are introduced. Solution concepts, such as the Lindahl equilibrium and the Shapley value are defined in the dynamic setting.
Keywords: optimal control, climate change, game theoretic modeling, social welfare weights, Lindahl equilibrium, Shapley value
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