Document Type

Article

Journal/Book Title/Conference

Economics Research Institute Study Paper

Volume

95

Issue

11

Publisher

Utah State University Department of Economics

Publication Date

1995

First Page

1

Last Page

27

Abstract

In this paper we study some aspects of the question of international environmental regulation from a game theoretic perspective. We address two broad questions. First, we examine the circumstances under which the pursuit of unilateral environmental policy by a country in a Stackelberg game will make that country worse off Second, we study the effects of environmental regulation by means of alternate price control instruments in a Stackelberg game where there is transboundary pollution.

We find that there are plausible theoretical circumstances in which the pursuit of unilateral environmental policy is not a good idea. Further, we show that in choosing between alternate pollution control instruments, national governments typically face a tradeoff between instruments which correct more distortions but are costly to implement and instruments which correct fewer distortions but are less costly to implement. In particular, we obtain a dominance result for a tariff policy; this result favors the use of tariffs from an informational standpoint alone.


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