Game Theory in the Economics of Climate Change
‘How useful is game theory in analysing the deadlocks and progressions over the economics of climate change policy at the recent Copenhagen summit ?’
A secondary data and literature review based project
October 2010
Mark Burke
Introduction
Aims and Methodology
This project seeks to analyse how useful Game Theory is in explaining the decisions ( or lack thereof ! ) on economic policy taken by governments at the recent Copenhagen summit on climate change ( 6th – 18th December 2009 ). Starting with the classical Prisoners Dilemma, can Game Theory explain why the players defected against each other ( i.e. cooperation did not happen at Copenhagen ) when most ‘rational’ agents would have expected co-operation ? ( self interested meaning being capable of seeing long term consequences as well as short term gain ! ) This paper will consider how far the nuances of game theory can convincingly explain the ‘result’ of the Copenhagen summit. Can ‘free riding’, the ‘tragedy of the commons’ and ‘co-ordination failures’ explain the lack of progress at the 2009 Copenhagen negotiations on climate change ? On the other hand, can the ‘Nash equilibrium’, ‘assurance games’ and ‘ultimatum games’ aid our understanding of what progress has been made on climate change policy at the Copenhagen summit ? Many papers appear to have correctly predicted the failure of the Copenhagen summit to achieve legally binding targets on carbon emissions. More-so, they often convincingly explain why the negotiations would fail, e.g Bruce de Mesquita’s article in ‘Foreign Policy’ magazine ( November 2009 ) . Thus it seems Game theory may have much validity in explaining how the negotiations played out at Copenhagen.
This project will consider classical texts on Game theory, recent working papers on Game theory and it’s application to environmental policy, and the recent events at Copenhagen. It will also depend to some extent on journalists’ accounts who were privy to
A secondary data and literature review based project
October 2010
Mark Burke
Introduction
Aims and Methodology
This project seeks to analyse how useful Game Theory is in explaining the decisions ( or lack thereof ! ) on economic policy taken by governments at the recent Copenhagen summit on climate change ( 6th – 18th December 2009 ). Starting with the classical Prisoners Dilemma, can Game Theory explain why the players defected against each other ( i.e. cooperation did not happen at Copenhagen ) when most ‘rational’ agents would have expected co-operation ? ( self interested meaning being capable of seeing long term consequences as well as short term gain ! ) This paper will consider how far the nuances of game theory can convincingly explain the ‘result’ of the Copenhagen summit. Can ‘free riding’, the ‘tragedy of the commons’ and ‘co-ordination failures’ explain the lack of progress at the 2009 Copenhagen negotiations on climate change ? On the other hand, can the ‘Nash equilibrium’, ‘assurance games’ and ‘ultimatum games’ aid our understanding of what progress has been made on climate change policy at the Copenhagen summit ? Many papers appear to have correctly predicted the failure of the Copenhagen summit to achieve legally binding targets on carbon emissions. More-so, they often convincingly explain why the negotiations would fail, e.g Bruce de Mesquita’s article in ‘Foreign Policy’ magazine ( November 2009 ) . Thus it seems Game theory may have much validity in explaining how the negotiations played out at Copenhagen.
This project will consider classical texts on Game theory, recent working papers on Game theory and it’s application to environmental policy, and the recent events at Copenhagen. It will also depend to some extent on journalists’ accounts who were privy to
References: Sen, A. ( 1984) ( Resources, Values, and Development ) The Guardian http://www.guardian.co.uk/environment/2009/dec/18/obama-speech-copenhagen