Hans-Peter Weikard

CARTEL STABILITY UNDER AN OPTIMAL SHARING RULE

In this paper I analyse the stability of cartels in games with heterogeneous players and externalities. I introduce a class of sharing rules for coalition pay-offs, called ‘optimal sharing rules’, that stabilize all cartels that are possibly stable under some arbitrary sharing rule. To illustrate the impact of optimal sharing with heterogeneous players and positive externalities I analyse a public goods game. In contrast to games with identical players that are common in the study of international environmental agreements, my results show that large coalitions may well be stable when optimal sharing is applied.

Sequential Sharing Rules for River Sharing Problems

We analyse the redistribution of a resource amongst agents who have claims to the resource and who are ordered linearly. A well known example of this particular situation is the river sharing problem. We exploit the linear order of agents to transform the river sharing problem to a sequence of two-agent river sharing problems. These reduced problems are mathematically equivalent to bankruptcy problems and can therefore be solved using any bankruptcy rule. Our proposed class of solutions, that we call sequential sharing rules, solves the river sharing problem. Our approach extends the bankruptcy literature to settings with a sequential structure of both the agents and the resource to be shared. In the paper, we first characterise the class of sequential sharing rules. Subsequently, we apply sequential sharing rules based on four classical bankruptcy rules, assess their properties, provide two characterisations of one specific rule, and compare sequential sharing rules with three alternative solutions to the river sharing problem.

Market-based mechanisms for biodiversity conservation: a review of existing schemes and an outline for a global mechanism

Continuous decline of biodiversity over the past decades suggests that efforts to decrease biodiversity loss have been insufficient. One option to deal with this problem is the use of market-based mechanisms for biodiversity conservation. Several studies have analysed such mechanisms individually, but there is no comprehensive review with a comparative assessment of the performance of various mechanisms. This paper presents (i) an analysis of the economic conditions under which markets for biodiversity can be expected to function; (ii) an analysis of the efficiency of five selected biodiversity markets in the light of market and contract theory; and (iii) an assessment of the potential to scale up local or national payment mechanisms for biodiversity conservation. Our analysis shows the difficulties that market-based mechanisms face, among which are the need to ensure long-term conservation and the lack of a standardized unit of measurement for biodiversity. We provide a number of recommendations on how to overcome these difficulties. We argue that the set-up of a global registry embedded within the framework of the Convention on Biological Diversity would facilitate measurement, reporting and verification of biodiversity credits to support market-based mechanisms.

How Widespread is Undernourishment? A Critique of Measurement Methods and New Empirical Results

Programmes against hunger require the identification of the undernourished. For this purpose a cutoff point is fixed which partitions the population of a region into two groups: those with insufficient access to food and those whose food needs are satisfied. We describe the standard method used to set the cutoff point. We explain how the choice of a unique cutoff point for a group of people may underestimate or overestimate undernourishment when requirements vary across people. Furthermore, we present corrected estimates of the proportion of the undernourished for a large sample of developing countries. Our results reveal that the estimation error of the standard method can be large.

The political economy of international environmental agreements: a survey

This paper surveys the recent literature on the political economy of the formation of international environmental agreements. The survey covers theoretical modelling approaches and empirical studies including experimental work. Central to our survey is the question how the political process impacts different stages of agreement formation and stability. We distinguish the rules defined during pre-negotiations that govern negotiations, ratification and implementation. Strategic delegation and lobbying are directly relevant during the negotiation and ratification phases. Implementation, the choice of policy instruments at the national level, will also be impacted by lobbying and indirectly influence negotiations. We find that the basic theoretical framework for the analysis of international environmental agreements is largely unrelated to empirical approaches. Furthermore, we observe that models of the political process of agreement formation, like for example sequential game models, are yet to be developed.

The Stability and Effectiveness of Climate Coalitions: A Comparative Analysis of Multiple Integrated Assessment Models

We report results from a comparison of numerically calibrated game theoretic integrated assessment models that explore the stability and performance of international coalitions for climate change mitigation. We identify robust results concerning the incentives of different nations to commit themselves to a climate agreement and estimate the extent of greenhouse gas mitigation that can be achieved by stable agreements. We also assess the potential of transfers that redistribute the surplus of cooperation to foster the stability of climate coalitions. In contrast to much of the existing analytical game theoretical literature, we find substantial scope for self-enforcing climate coalitions in most models that close much of the abatement and welfare gap between complete absence of cooperation and full cooperation. This more positive message follows from the use of appropriate transfer schemes that are designed to counteract free riding incentives.

The Life and Death of the Dutch Groundwater Tax

We examine the Dutch national groundwater tax (GWT) – a ‘win–win, green’ tax that promised to reduce distortions by simultaneously reducing the income tax burden and improving environmental outcomes. We find no evidence of these impacts. Instead, we see that the GWT increased distortions by taxing a narrow base (a few drinking-water companies reliant on raw groundwater) and interfering with groundwater management programmes funded by an existing provincial groundwater fee. The Dutch government revoked the GWT for being fiscally inefficient and environmentally unhelpful on 31 December 2011, but this story provides some useful lessons.

Composition Properties in the River Claims Problem

In a river claims problem, agents are ordered linearly, and they have both an initial water endowment as well as a claim to the total water resource. We provide characterizations of two solutions to this problem, using Composition properties which have particularly relevant interpretations for the river claims problem. Specifically, these properties relate to situations where river flow is uncertain or highly variable, possibly due to climate change impacts. The only solution that satisfies all Composition properties is the ‘Harmon rule’ induced by the Harmon Doctrine, which says that agents are free to use any water available on their territory, without concern for downstream impacts. The other solution that we assess is the ‘No-harm rule’, an extreme interpretation of the “no-harm” principle from international water law, which implies that water is allocated with priority to downstream needs. In addition to characterizing both solutions, we show their relation to priority rules and to sequential sharing rules, and we extend our analysis to general river systems.

International Climate Agreements Under Induced Technological Change

We examine the impact of technological change on the stability of climate coalitions and explore how international cooperation on abatement affects the incentives of signatories to invest in R& ...

The Role of Proactive Adaptation in International Climate Change Mitigation Agreements

This paper investigates the role of proactive adaptation in international mitigation coalition formation. Adaptation is introduced into a three stage cartel game of coalition formation. We analytically derive the optimal level of mitigation and proactive adaptation for the singletons and coalition members. We introduce the AD-STACO model which is constructed based on the STACO model, which is an applied three-stage cartel formation model with 12 heterogenous regions. Simulating all possible coalitions (4084) and checking for internal and external stability, we investigate how different levels of proactive adaptation will affect the payoffs in Grand coalition and the incentives to freeride. We examine which stable coalitions are found with different levels of proactive adaptation and whether regions can gain from overadaptation in the best performing stable coalition. We find that though payoffs increase in the Grand coalition with lower adaptation, incentives to leave increase. Coalition members can increase their payoffs through overadaptation.