4 Presentations

• 
  10:30 AM - 11:00 AM

  Evolutionary Farsightedness in International Environmental Agreements

  • Samar Garrab, presenter, HEC Montréal
  • Michèle Breton, GERAD, HEC Montréal

  In this paper, we consider the air pollution issue, more specifically the global stock of airborne pollutants (e.g. greenhouse gases). This stock is affected by the production activities of each country, and its negative impact is shared globally.
  The aim of this paper is to propose a non-cooperative dynamic game model for the formation of international environmental agreements (IEAs) and the evolution of the number of their participating countries. The model assumes that both the number of signatory countries and the stock of accumulated pollution evolve over time, as a result of countries’ emission and membership decisions. The evolution of the number of signatory countries is described by a discrete-time replicator dynamics, while that of the stock of pollution results from feedback emission strategies.
  This paper contributes to the literature on the formation of IEA by explicitly modeling the mechanism of the adhesion process of members in an IEA with a punishment clause. Our paper can also be related to the farsightedness literature, but, contrary to the farsightedness rational conjecture assumptions, we do not suppose that coalitions immediately break down whenever a defection is detected, or that stable coalitions do not change size as the state of the world evolves. Rather, we recognize that it takes time for an IEA to achieve stability. Following the spirit of evolutionary games, we assume that evolutionary pressures favor the group of countries that perform better, which is gradually joined by new players, where the speed at which countries switch groups is related to the difference in welfare. Contrary to evolutionary games, the players are aware of these evolutionary pressures and account for them in their strategic emission decisions. We name this particular awareness evolutionary farsightedness.
  We show that evolutionary farsightedness is beneficial to the formation and stability of self-enforcing IEAs.

• 
  11:00 AM - 11:30 AM

  Linear Quadratic Games Defined on Event Trees

  • Puduru Viswanadha Reddy, presenter, GERAD, HEC Montréal
  • Georges Zaccour, Chair in Game Theory and Management, GERAD and HEC Montréal

  In this paper we study N player finite-horizon discrete-time dynamic stochastic games where the uncertainty is described by an event tree. We consider linear state dynamics, with one period lag structure, and quadratic costs. We derive necessary and sufficient conditions for the existence of S adapted Nash equilibria with open loop and closed loop (no memory) information structures. We observe that the existence of these equilibria is related to solvability of a generalized backward Riccati recursion defined on the event tree. Next, we consider these games with (node specific) linear constraints. We show that the S adapted Nash equilibria (both open loop and closed loop) can be obtained by solving a parametric linear complementarity problem defined on the entire event tree.

• 
  11:30 AM - 12:00 PM

  A Dynamic Game of International Pollution under Uncertainty and Learning

  • Nahid Masoudi, presenter, HEC Montréal

  We introduce learning in an N-player dynamic game of international pollution, while planers are facing with ecological uncertainty. We analytically find and compare the feedback non-cooperative strategies of players under three different behavioral and information assumptions: Bayesian learner, adaptive learner and informed player. Besides we find out that while uncertainty due to anticipation of learning ends up to a decrease in total emissions, depending on functional form of distributions and beliefs itself, the effect of structural uncertainty could be either an increase, decrease, or even no change in the emissions of individual players and also total emissions. While the first observation is totally in line with the available literature the latter results are rather new and more controversial. Moreover, we find out that a more optimistic player may either emit less or more than a less optimistic one, depending on how beliefs affect their expectations about the unknown variable. Then we show that if one learner player feels more risk while others beliefs do not change, this player will decrease his emission and others react to this decrease by increasing their emission but they are never strong enough to overcome the direct effect.

• 
  12:00 PM - 12:30 PM

  A Robust Game Formulation of Burden Sharing in an International Climate Agreement

  • Alain Haurie, presenter, GERAD and ORDECSYS
  • Frédéric Babonneau, ORDECSYS
  • Jean-Philippe Vial, ORDECSYS
  • Marc Vielle, École Polytechnique Fédérale de Lausanne

  Climate negotiations concerning GHG emission permit supply by different groups of countries participating in an international emissions trading system are represented as a noncooperative game with coupled constraints. The coupled constraint will correspond to a global emission budget for the period 2020-2050, whereas the strategies are the emission quotas supplied by each group of countries in each five year period. A meta-modeling approach is used to obtain the economic and climatic modules of the game from the general economic equilibrium model GEMINI-E3 and the general climate circulation model of moderate complexity GENIE. To take care of uncertainties introduced by the meta-modeling approach we introduce robust optimization in the definition of equilibria with coupled constraints. Some preliminary numerical simulation results will be presented.