(...) In the absence of any cooperation, each country will maximize ist’s own net benefit. This is where the own marginal abatement cost is equal to the own marginal benefit of abatement. In Abb. 43 this is at the intersection of the MAC curve with the MBi curve. A* is the resulting level of abatement. This is the noncooperative Nash solution to the pollution abatement game. In case countries cooperate, they want to maximize the global net benefit of abatement. Assuming identical countries, global net benefit is just the sum of every’s country net benefit. In case of asymmetric counties, the problem of allocating the net benefit arises. The global net benefit of abatement receives its maximum at which a country’s own marginal cost of abatement os{is} equal to the global marginal benefit of abatement. The cooperative solution is given by the abatement level A** in Abb.
43.
[Abb. 43]
Obviously, the cooperative solution demands greater abatement efforts, but results in greater net benefit. Note, that the gain of cooperation depends on the slope of the MBi curve and the MB curve. The larger the difference of the slopes, the more difficult is the possibility to reach a cooperative solution, since this favours free riding. Note, that the relative slope of the MBi and MB curve is determined by the number of countries. The gain depends further of the relative slopes of the MAC and the MBi curves. The model described above allows only for to extreme solutions: cooperation or non-cooperation. A third alternative is a partial cooperation solution: Some countries agree to reduce pollution to a negotiated amount, other countries act independently by choosing their individual abatement level. The Kyoto-agreement is an example of such an partial cooperative solution. The feasibility to reach an international agreement in climate gas reduction is described below. Before, some institutional arrangements to reach collusive or cooperative behaviour are discussed.
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