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Environmental Applications

  • László Á. Kóczy
Chapter
Part of the Theory and Decision Library C book series (TDLC, volume 48)

Abstract

The environmental side-effects of economic activities are textbook examples illustrating the concept of externalities. In this chapter we present four environmental problems and their partition function form solutions. The problem of pollution abatement lies in the difference between the party who realises the abatement costs and the party who realises the benefits. Cooperation can internalise these positive externalities and may lead to an increased abatement effort. International environmental agreements provide a framework for such widespread cooperation, but as the abatement effort increases, so does the temptation to free-ride on others’ efforts. In the next model the shared public resource is a fishing lake, where noncooperative behaviour leads to overfishing and low profitability. Straddling stock fisheries are studied using a dynamic bioeconomic model that takes reproduction into account, too. Unfortunately the welfare-optimal full cooperation is only likely in trivial cases. At last, river sharing models the allocation of a joint resource – water – with asymmetric externalities over a directed network such as a river and it tributaries. When players are satiable non-connected coalitions and externalities appear.

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Copyright information

© Springer International Publishing AG, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Institute of Economics, Centre for Economics and Regional StudiesHungarian Academy of SciencesBudapestHungary

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