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Theoretical foundations of negotiations and cost sharing in transfrontier pollution problems

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  • Chander, Parkash
  • Tulkens, Henry

Abstract

In this paper, a mathematical model is formulated of negotiations taking place between agents who use a common resource, and are also concerned with the quality of the latter, for various (and possibly conflicting) reasons. The model makes explicit an “ecological surplus” that summarizes the benefits from cooperation among the agents in situations of this type. The negotiations model is described by a dynamic process bearing on a multilateral externality, that converges to an individually rational Pareto optimum. The process embodies a cost sharing rule for pollutant abatement in the countries involved, derived from a sharing rule of the surplus, that is also shown to have “strategic stability” in the game theoretic sense of an imputation in the core of some cooperative game associated with the negotiation process. The connections are explored between this cost-sharing rule and the “free rider problem” in public goods theory.
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  • Chander, Parkash & Tulkens, Henry, 1992. "Theoretical foundations of negotiations and cost sharing in transfrontier pollution problems," European Economic Review, Elsevier, vol. 36(2-3), pages 388-399, April.
    • Handle: RePEc:eee:eecrev:v:36:y:1992:i:2-3:p:388-399
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