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Bargaining for an efficient and fair allocation of emission permits to developing countries

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  • Houba, Harold
  • Kremers, Hans

Abstract

The paper focusses on the negotiations between the developed countries currently implementing emission permit markets versus the developing countries who want to join this market. We model the negotiations according to the ’Alternating Offers Bargaining’ model. The objective is to obtain an efficient and fair allocation of tradeable emission permits between these two players. At each period, one player proposes a feasible allocation of the goods for both players. Then the other player either ends the negotiations by accepting the proposal, or prolongs them by rejecting it. The proposal is accepted if this player considers it fair. If rejected, there is a certain probability that the next round is played and the other player making a proposal. The equilibrium concept in this model is that of a subgame perfect equilibrium.

Suggested Citation

  • Houba, Harold & Kremers, Hans, 2007. "Bargaining for an efficient and fair allocation of emission permits to developing countries," Conference papers 331600, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:331600
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    References listed on IDEAS

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    8. Houba, Harold, 2007. "Alternating offers in economic environments," Economics Letters, Elsevier, vol. 96(3), pages 316-324, September.
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    13. Hertel, Thomas, 1997. "Global Trade Analysis: Modeling and applications," GTAP Books, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, number 7685, December.
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    Cited by:

    1. De Miguel, Carlos & Ludena, Carlos & Schuschny, Andres, 2009. "Climate Change and Reduction of CO2 Emissions: the role of Developing Countries in Carbon Trade Markets," Conference papers 331823, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.

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