New Horizons in Environmental Economics series
Chapter 1: Introduction
International environmental problems have received increasing attention from economists in recent years. Two basic strands of literature may be distinguished. The ﬁrst strand estimates the costs and beneﬁts of various abatement targets under diﬀerent cost allocation rules. It also discusses institutional issues and the design of treaties with respect to their eﬃciency. In particular the problem of global warming caused by the so-called greenhouse gases (see, for example, Brunner 1991; Cansier 1991; Chapman and Drennen 1990; Cline 1992a, b; Crosson 1989; Grubb 1989; IPCC 1996a, b; Manne and Richels 1991; Michaelis 1992; Nitze 1990; Nordhaus 1991a, b, c; Schelling 1991; and Welsch 1995) and the ‘acid rain’ problem due to sulfur and nitrogen oxides (for example, Crocker 1984; Førsund and Naevdal 1994; Foster 1993; Newbery 1990; Tahvonen et al. 1993; and Welsch 1990) have been studied in depth. The second strand of literature has approached the problem of international pollution control from a game theoretical perspective (for example, Alho 1992; Andersson 1991; Buchholz and Konrad 1994; Chen 1997; Endres and Finus 1998a; Heister 1998; Kölle 1995; Kuhl 1987; MüllerFürstenberger and Stephan 1997; Van der Ploeg and de Zeeuw 1992; and Welsch 1993). The incentive scheme of countries which sign a treaty and the stabilization of international environmental agreements (IEAs) are typical issues analyzed by this literature. This book is in the tradition of this second strand of literature. Since, broadly speaking, game theory analyzes the interaction between agents and formulates hypotheses about their...