| This study has been undertaken to investigate the problems and prospects of global public goods(climate change)by using game theory analysis for international cooper-ation.In this regard,I have taken the two prospects of game theory:one is the dynam-ic cooperative game theory and second by using the STACO model,I found some very interesting results empirically.I divided the whole world into 12 regions for the cooperation of climate change negotiation.The study is divided into seven chapters.Chapter one is introductory.It clarifies the background to the investigation,the problems the study addresses,the objective and benchmarks of the study,the significance and limitation of the study as well as the definition and explanation of some key terms.Chapter Two is a review of related lit-erature where key concepts and theories surrounding specific benchmarks of the study objective are discussed to prepare the ground for analyzing the problems and pro-spects of using this strategy in game theory.Chapter Three is an exposition of the formulation of a game theoretic modeling for the problem of climate change.In this regard,some stages are introduced that how the players will sign an agreement and how they will distribute their payoff.Chapter Four dwells a new findings from the game theoretic modeling by using the mathematical concept in cooperative game the-ory.In this chapter,I have found a mathematical modeling framework that will allo-cate the cost among the players with Shapley value decomposition.Chapter five ex-plains the empirical methodology.parametric calculations.results and discussion.Chapter seven is on policy recommendation,conclusion and future research directions.Climate change is one of the most complex and common problem for the world.De-spite the remarkable achievements in the international cooperation process,there are still many important issues that need to be resolved.In conclusion,when an issue is rejected in the Protocol,then the stability of international agreements will create a threat for all the regions.In addition,the goal of reducing greenhouse gas emissions is under the Kyoto Protocol and the credit for the absorption of this problem is was greatly recognized in Kyoto Protocol.The weakening of the Kyoto is due to the with-drawal of the United States(US)that is reducing the efficiency of the Kyoto Protocol.When Russia's quota(hot air)is supplied to the emissions market.in fact,by purchas-ing emissions credits,anyone will not have to make any turther cuts.It is presented in many studies.The environmental effect of the international environmental agreement(IEA)is a question of violent behavior is the same problems of the past.For example,it has been argued that the Oslo Protocol and the Montreal Protocol are not at a level where the agreed international reduction commitment would pose a particular burden sharing.This study was conducted to investigate the stability and environmental effects of in-ternational environmental cooperation on climate.In this study.the climate change cooperation problem is taken with game theory analysis(Stable coalitions)under var-ious cooperation scenarios and the policy implications for enhancing the efficiency of international cooperation,respectively.The game between regions was modeled as a two stage game from the viewpoint of stable coalition formation.At the first stage,each country will decide(at the same time)whether it will participate in the coalition.In the second stage,the countries in the coalition determine the amount of reduction to maximizing the payoff from coali-tion and then countries determine their reductions to the extent that they individually maximize their own benefit.This means that in the case of a coalition,the marginal cost will be reduced until that level when it is equal to the fmarginal benefit.In addi-tion.Countries that do not do so determine their reductions at the same level of mar-ginal reductions and marginal benefits.The equilibrium of Stage 2 is determined.one equilibria is derived,when I apply backward induction.The two-stage game can be solved as a single-stage game.Therefore,without consideration of sub-game perfec-tion.arbitrary equilibrium can be analyzed.ivIn this game,a stable coalition is defined as a stability concept.In order to satisfy the stability.the internal stability should be satisfied at the time.where all regions are agreed to remains in the coalition.External stability is the result of all regions outside the coalition and has no incentive to join.For simulation analysis,the STACO model of Finus et al.(2006)was used.The STA-CO model is based on climate change and climate change costs(greenhouse gas re-duction costs).The main regions for climate change problem(US,EU,China,India,Japan,Russia,Brazil and etc.)are included that are suitable for the purpose of this study.In particular,it has been selected as an appropriate model for analyzing the problem of free riding,which is classified into twelve regions that is very important for the presence of multiple countries.vSimulation results show that,as in most previous studies,it was confirmed that it is very difficult to construct.The regions that make up the coalition(Welfare transfer)between two or more countries(or counties)did not satisfy the stability.Although when the transfer of welfare is allowed between the regions,But the amount is very small.In this case,one of the important characteristic of the coalition is that the mar-ginal cost of greenhouse gas mitigation is lower than the marginal damage cost.It means that this is because of cooperation in which interregional cooperation can maintained the stability through the transfer welfare to every region.In this study,three welfare transfer scenarios are considered.The first is the welfare allocation method proposed by Chander&Tulkens(1995;1997).The additional ben-efit of the composition of the coalition is proportional to the marginal damage cost of climate change.In this international environmental problem,the concept of Lindal Equilibrium is reproduced as a method of payoff distribution.The second and third are the use of the concept of Shapley value and Nash bargaining solution for coopera-tive equilibrium.All of these three scenarios are used by the game theoretic analysis for the international environmental issue.Under the "Chander and Tulkens" transfer scenario,two stable stations {US,CN} and{EU,CN} was found.The maximum potential welfare will be achieved,when a grand coalition is attained after excluding the welfare from singleton coalition and at this level the maximum welfare will be increased.It is possible to achieve about 1/4 of this maximum welfare under the "Chander and Tulkens" transfer scenario.Both of these cases include China,As US and the EU can transfer welfare and china has an incentive to participate.The United States and the EU have preferred each other to form the coalition with China and any the other region is not making a coalition with China.This kind of game structure between the US and the EU is a Coordination game(in game theory,such game type is called a 'chicken game').This game is designed to help both play-ers.vi When I apply the Shapley value transfer,the three coalitions are founded that are sta-ble:{US,EC,CN},{JN,ET,CN} and {EC,ET,CN}.The participation of the East-ern union is distinctive but it doesn't increase the welfare significantly.However,the political influence that could make a sense for this kind of problem in game theory and should be noted that the Shapley value can be a contribution to form of a large coalitions.Compared to "Chander and Tulkens" transfer scenario,the Eastern Euro-pean region is stable under Shapley Value transfer with larger welfare,while,the other regions have relatively low welfare with stable coalition.Under the Nash negotiation transfer scenario,the composed coalition {ET,CN,IN} are founded stable.The only way to rely on pre-welfare is to form the wide coalitions that look too diffi-cult to solve global environmental problem.Carraro&Siniscalco(1993)suggested that the regional participation will make the cooperation after some countries formed a coalition.I analyzed the possibility of expanding the coalition by some transfer mechanisms(Stable coalitions with commitments).At any time,when the coalition is expanded then it is assumed that the commitment does not deviate from the coopera-tion even if the incentive is withdrawn.In this case,"Chander and Tulkens rule","Shapley rule" and "Nash bargaining rule" are applied.In the case of forming a coali-tion in the first place,(If the existing association did not transfer additional welfare to the new participant)was found to be a stable(two in the case of the "Chander and Tulkens" scheme,three in the Shapley method,and a single in the Nash equilibrium).Thus.the size of the stable coalition has widely expainded when major cooperative members support new participants.In case of "Chander and Tulkcens" rule.four stable coalitions were found and in the case of the Shapley rule,ten enlarged stable coali-tions were founded involving in range from seven to nine regions.The coalition that achieves the highest welfare is the United States,Eastern Europe,and China and adds the other OECD countries former Soviet Union,energy exporting countries.India,developing countries in Asia,and other regions.These coalitions covered 82.5%of global emissions(as of 2010)and will capture the 81.6%of maximum welfare.The fact that such maximum welfare is possible(cooperative commitments are re-quired)that is very effective in solving the environmental problem.In reality,most of the international environmental treaty of the United Nations has been applied as a principle to the main obligations of major industrialized countries that will encourage the participation of developing countries.These principles can play an important role in the formation of effective international cooperation.This principle needs to be strengthening the climate change convention and the Kyoto Protocol.The game theory in my analysis could predict that the burden sharing will be week at first stage if the first stage commitment of some countries supports new participants in stage 2.The reason is that because it reduces the incentive to take part in the first stage.This in turn can weaken the efficiency of the whole game by weakening the burden commitment in the first stage.But before the developing countries,the ad-vanced countries must play a leading role in the initial burden sharing.A tendency has been founded in many international environmental negotiations.Therefore,the real commitments of the most countries and the international welfare transfers are based on the burden sharing.It is a very important policy direction to strengthen the cooper-ation for climate change negotiation.My simulation results show that in the form of coalition member in all games.In other words,the coalitional structure that does not include China seems to be unstable.It is interpreted that coalitional structure in which China does not participate at the deci-sion has not provide sufficient surplus with stability,although it has a larger participa-tion with low cost.In developing countries,such as China,where the GHG mitigation capacity is high,it is necessary to play a major role for reducing the burden as much as possible,even though the cost of damaging climate change is low.Such kinds of incentives that will increase the participations are necessary.The allocation mecha-nism which can set equilibrium cost to increase the coalition size.Finally.the analysis was tried to attempt the strength of the inter-regional cooperation structure.For example.In the case of the Oslo Protocol,Annex I countries in the Kyo-to Protocol and as well as in the European Union,there are limited predictions for re-duction commitment that will be shared among the regions with maximum profit.Thus.It seems to be usual to explain a cooperation or coalition in which where each participant decides(emission reduction in my study)to get a maximum net benefit from the coalition.Therefore,in a real-world situation.it is a solid statement that it is very difficult to find such kind of perfect mechanism that will ensure perfect coopera-tives.So.this might be an ideal situation that what will occur if the assumptions of perfect cooperatives behavior are relaxed.The assumption for the preceding examina-tion assumes that every participant decreases his emission until that level where his marginal cost for reducing the emission will equal to the sum of his marginal benefit in the coalitions.The "imperfect cooperation" is defined as the coalition in which eve-ry participant will reduce his emission until his own marginal cost of reducing is low-er than(equal to X(<100)%of)the sum of the marginal benefit to the entire partici-pants in the coalition.I call 'X' the "strength of a cooperation".Then,the strength of the "perfect cooperation" will be '100'.In this way,if the amount of reduction within the coalition is lowered,a stable coali-tion is formed even if there is no pre-welfare mechanism.In addition,as the amount of the reduction commitment is lowered for all regions.Under "Chander-Tulkens"transfer scheme,a world coalition will be stable at X=10 with imperfect cooperation.So,the all regions will contribute in the stable coalition,when the reducing strength with commitment is lower.However.the global net benefit could be lower due to smaller reducing effort instead of wider participation.Results of this study showed the strength of cooperation(X)within the coalition varies from 100 to 10,the range of participation of the coalition is widely expanded and the strength of the cooperation is not changing the welfare of the world.I have found some interesting results under the imperfect cooperation that have the stable coalitions for USA,EU,China and Japan.Such kind of coalitions does not exist in the previous literature.It indicates that the efficient cooperation will be sacrificed to get the suitable coalitions structure.On the other hand,if the strength of the cooperation is lower than the optimum level then it is greater by expanding the strength of coalition that will increase the welfare of the entire world.The findings from my results show that the imperfect coalition could raise the global net benefit by expanding the stable coalition.Though,there ex-ist some limitations for this procedure.With "Chander-Tulkens" transfer scenarios,the global net benefit would be maximum when X=90.Other enlarged coalitions will produce low global net benefit due to occurrence with weak cooperation.These re-sults suggest that for the formation of a stable coalition,in order to maximize welfare,it is necessary to balance the strength of cooperation of the committed countries at a level that is not too low.In conclusion,the results of this study show that stable coalition formation is very dif-ficult for the problem ofclimate change.This is because when the coalitions are ex-panded to implement the strength of cooperation for reducing the incentives to join the cooperation.Various kinds of solution could be suggested for such kind of free rider problems.One of the approaches is that the international environmental prob-lems could be resolved by increasing the level of the coalition to alleviate such kind of phenomena that could provide more benefit on joining the coalition.The free-rider problem could be solved by trade measure and issue linkage.The trade measures can be considered in attracting resource for free ride incentive and it is an effective trade measure to overcome the free riding problem by increasing coalition structure.Though,higher free rider incentives from the large coalition might be alleviated with trade measures which may play an effective role in large coalition's structure."Miti-gation Fund" is another option that will subsidize with the additional emission reduc-tion. |
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