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 11: A Conjectural Cooperative Equilibrium for Strategic Form Games

Sergio Currarini and Marco Marini

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


Sergio Currarini and Marco Marini* 1. INTRODUCTION Intuitively a cooperative equilibrium is a collective decision adopted by a group of individuals that can be viewed as stable (that is, an equilibrium) against all feasible deviations by single individuals or by proper subgroups. While modelling the possibilities of cooperation may not pose the social scientist particular problems, at least once an appropriate economic or social situation is clearly outlined, the definition of stability may be a more demanding task for the modeller. This is because the outcome, and the profitability, of players’ deviations depend heavily on the conjectures they make over the reaction of other players. As an example, a neighbourhood rule to keep a common garden clean possesses different stability properties depending on whether the conjectured reaction in the event of shirking is, in turn, that the garden would be kept clean anyway or, say, that the common garden would be abandoned as a result. Similarly, countries participating in an international environmental agreement will possess different incentives to comply with the prescribed pollution abatements depending upon whether defecting countries expect the other partners to be inactive or to retaliate. The main focus of the present chapter are cooperative equilibria of games in strategic form. A cooperative equilibrium of a game in strategic form can be defined as a strategy profile such that no subgroup of players can ‘make effective’ – by means of alternative strategy profiles – higher utility levels for its members than...

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