Game Practice and the Environment

Game Practice and the Environment

The Fondazione Eni Enrico Mattei series on Economics, the Environment and Sustainable Development

Edited by Carlo Carraro and Vito Fragnelli

This book summarises the latest achievements of researchers involved in the application of game theory to the analysis of environmental matters. It provides an overview of different methods and applications, and gives the reader new insights on the solutions to complex environmental problems. The authors investigate various game theoretic approaches, including cooperative and non-cooperative game theory, and analyse both dynamic and static games. They illustrate the application of these approaches to global and local environmental problems, and present novel but effective tools to support environmental policy making. In particular, they focus on three important issues; climate negotiations and policy, the sharing of environmental costs, and environmental management and pollution control.

Chapter 5: Cost Sharing in a Joint Project

Stef Hendrikus Tijs and Rodica Brânzei

Subjects: economics and finance, environmental economics, game theory, environment, environmental economics


1 Stef Hendrikus Tijs and Rodica Brânzei INTRODUCTION Cooperation is an essential part of human interaction. Environmental problems in particular call for cooperation. Game theory can contribute to smoothing cooperation by developing attractive and transparent rules for the allocation of costs or rewards among the participants in joint projects. There is a huge literature dealing with cost sharing problems using game theory. For surveys see Tijs and Driessen (1986) and Young (1994). In this chapter we consider situations where agents plan to cooperate in a complex project. The agents have to decide about the form of the project and about the associated cost sharing. Both facets depend on the relevant costs and the budgets (which we identify with the willingness to pay and the rewards) of the agents for the different forms which the project may finally take. Our model can be used, for example, for the following: cooperation in irrigation systems (cf. Aadland and Kolpin, 1998; Kolpin and Aadland, 2001), airport landing networks (cf. Brânzei et al., 2002; Koster et al., 2001, Littlechild and Thompson, 1977; Potters and Sudhölter, 1999), railway networks with facilities (Fragnelli et al., 2000; Norde et al., 2002), and also car pooling, sharing a clubhouse and sharing playing-fields by different clubs and so on. In an irrigation system the wishes of the participants differ and are determined by the position of the pieces of land owned by the participants. In a railway system intercity trains will require di...

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