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Searching Market Equilibria under Uncertain Utilities

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  • A.V. Kryazhimskii
  • A. Nentjes
  • S. Shibayev
  • A.M. Tarasyev

Abstract

Our basic model is a noncooperative multi-player game in which the governments of neighboring counties trade emission reductions. We prove the existence of a market equilibrium (combining properties of Pareto and Nash equilibria) and study algorithms of searching a market equilibrium. The algorithms are interpreted as repeated auctions in which the auctioneer has no information on countries' costs and benefits and every government has no information on the costs and benefits of other countries. In each round of the auction, the auctioneer offers individual prices for emission reductions and observes countries' best replies. We consider several auctioneer's policies and provide conditions that guarantee approaching a market equilibrium. From a game-theoretical point of view, the repeated auction describes a process of learning in a noncooperative repeated game with incomplete information.

Suggested Citation

  • A.V. Kryazhimskii & A. Nentjes & S. Shibayev & A.M. Tarasyev, 1998. "Searching Market Equilibria under Uncertain Utilities," Working Papers ir98007, International Institute for Applied Systems Analysis.
    • Handle: RePEc:wop:iasawp:ir98007
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    References listed on IDEAS

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    1. Fudenberg Drew & Kreps David M., 1993. "Learning Mixed Equilibria," Games and Economic Behavior, Elsevier, vol. 5(3), pages 320-367, July.
    2. Hoel, Michael, 1991. "Global environmental problems: The effects of unilateral actions taken by one country," Journal of Environmental Economics and Management, Elsevier, vol. 20(1), pages 55-70, January.
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    4. Parkash Chander & Henry Tulkens, 2006. "Theoretical Foundations of Negotiations and Cost Sharing in Transfrontier Pollution Problems," Springer Books, in: Parkash Chander & Jacques Drèze & C. Knox Lovell & Jack Mintz (ed.), Public goods, environmental externalities and fiscal competition, chapter 0, pages 123-134, Springer.
    5. A. Nentjes, 1994. "Financial Instruments for the Control of Transboundary Pollution," Working Papers wp94024, International Institute for Applied Systems Analysis.
    6. Kaniovski Yuri M. & Young H. Peyton, 1995. "Learning Dynamics in Games with Stochastic Perturbations," Games and Economic Behavior, Elsevier, vol. 11(2), pages 330-363, November.
    7. Smale, Steve, 1980. "The Prisoner's Dilemma and Dynamical Systems Associated to Non-Cooperative Games," Econometrica, Econometric Society, vol. 48(7), pages 1617-1634, November.
    8. Ehtamo, Harri & Hamalainen, Raimo P., 1993. "A cooperative incentive equilibrium for a resource management problem," Journal of Economic Dynamics and Control, Elsevier, vol. 17(4), pages 659-678, July.
    9. A.V. Kryazhimskii & A.M. Tarasyev, 1998. "Equilibrium and Guaranteeing Solutions in Evolutionary Nonzero Sum Games," Working Papers ir98003, International Institute for Applied Systems Analysis.
    10. Maler, Karl-Goran, 1990. "International Environmental Problems," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 6(1), pages 80-108, Spring.
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    Cited by:

    1. de Vries, F.P., 1999. "The Behavioral Firm and Its Internal Game : Evolutionary Dynamics of Decision Making," Other publications TiSEM 81ac857a-7637-49d8-a52e-3, Tilburg University, School of Economics and Management.

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