Cheap Talk, Gullibility, and Welfare in an Environmental Taxation Game

We consider a simple dynamic model of environmental taxation that exhibits time inconsistency. There are two categories of firms, Believers, who take the tax announcements made by the Regulator to face value, and Non-Believers, who perfectly anticipate the Regulator's decisions, albeit at a cost. The proportion of Believers and Non- Believers changes over time depending on the relative profits of both groups. We show that the Regulator can use misleading tax announcements to steer the economy to an equilibrium that is Pareto superior to the solutions usually suggested in the literature. Depending upon the initial proportion of Believers, the Regulator may prefer a fast or a low speed of reaction of the firms to differences in Believers/Non-Believers profits.Environmental policy, Emissions taxes, Time inconsistency, Heterogeneous agents, Bounded rationality, Learning, Multiple equilibria, Stackelberg games

On Capturing Oil Rents with a National Excise Tax Revisited

In this paper the scope of Bergstrom’s (1982) results is studied. Moreover, his analysis is extended assuming that extraction cost is directly related to accumulated extractions. For the case of a competitive market it is found that the optimal policy is a constant tariff if extraction is costless. However, with depletion effects, the optimal tariff must ultimately be decreasing. For the case of a monopolistic market the results depend crucially on the kind of strategies the importing country governments can play and on whether the monopolist chooses the price or extraction rate. For a price-setting monopolist it is shown that the importing countries cannot use a tariff to capture monopoly rents if they are constrained to use open-loop strategies, even if the governments sign a tariff agreement. This result is drastically modified if the importing countries in the tariff agreement use Markov (feedback) strategies. For a quantity-setting monopolist the nature of the game changes and the importing country governments find it advantageous to set a tariff on resource importations. Moreover, in this case the importing countries in a tariff agreement enjoy a strategic advantage which allows them to behave as a leader.Tariffs, Tariff agreements, Non renewable resources, Depletion effects, Price-setting monopolist, Quantity-setting monopolist, Differential games, Open-loop strategies, Linear strategies, Markov-perfect Nash equilibrium, Markov-perfect Stackelberg equilibrium

Aggregation in Game Theoretical Situations

The thesis deals with the class of Aggregative Games, namely strategic form games where each payoff function depends on the corresponding player's strategy and on some aggregation among strategies of all involved players. The first part of the thesis is devoted to the multi-leader multi-follower equilibrium concept for the class of aggregative games: the considered game presents aymmetry between two groups of players, acting noncooperatively within the group and one group is the leader in a leader-follower hierarchical model. Moreover, as it happens in concrete situations, the model is affected by uncertainty and the game is considered in a stochastic context. Assuming an exogenous uncertainty affecting the aggregator, the multi-leader multi-follower equilibrium model is presented and existence results for the stochastic resulting game are obtained in the smooth case of nice aggregative games, where payoff functions are continuous and concave in own strategies, as well as in the general case of aggregative games with strategic substitutes. These results apply to the global emission game and the teamwork project game. Then, an investment in Common-Pool Resources is studied: the situation of many agents interested in a common-pool resource, like water resource, is modeled as an aggregative game and existence results of Nash equilibria are obtained with or without convexity-like assumptions. In the special case of quadratic return functions, the game is also considered under uncertainty i.e. when the possibility of a natural disaster with a given probability may occur. In the second part of the thesis, in line with the literature on additively separable aggregative games, a class of non cooperative games, called Social Purpose Games, is introduced. In this class of games the payoff of each player depends separately on his own strategy and on a function of the strategy profile, the aggregation function, which is the same for all players, weighted by an individual benefit parameter which enlightens the asymmetry between agents toward the social part of the benefit. The two parts of the payoff function represent respectively the individual and the social benefits. For the class of social purpose games it has been showed that they have a potential, providing also a comparison between the Nash equilibrium strategies and the social optimum strategies, namely when all the players agree in maximizing the aggregate profit. For social purpose games we study the existence of the so called coalition leadership equilibrium: it is a multi-leader multi-follower model where a cooperative behaviour is assumed between players of the leading group and they decide to maximize the aggregation of their payoffs. The rest of the players act noncooperatively. This kind of equilibrium presents a mixture of cooperative and noncooperative behaviour, situation that often occurs in many applicative examples. The weights affecting the aggregation function allow to derive explicit conditions under which the leading coalition is stable. An application to a water resource game is illustrated

On time-inconsistency and pollution control: A macroeconomic approach

Fiscal Policy;Pollution Control;environmental economics

Partial cooperation in strategic multi-sided decision situations

We consider a normal-form game in which there is a single exogenously given coalition of cooperating players that can write a binding agreement on pre-selected actions. The actions representing other dimensions of the strategy space remain under the sovereign, individual control of the players. We consider a standard extension of the Nash equilibrium concept denoted as a partial cooperative equilibrium as well as an equilibrium concept in which the coalition of cooperators has a leadership position. Existence results are stated and we identify conditions under which the various equilibrium concepts are equivalent. We apply this framework to existing models of multi-market oligopolies and international pollution abatement. In a multi-market oligopoly, typically, a merger paradox emerges in the partial cooperative equilibrium. The paradox vanishes if the cartel attains a leadership position. For international pollution abatement treaties, cooperation by a sufficiently large group of countries results in a Pareto improvement over the standard tragedy of the commons outcome described by the Nash equilibrium

Evolution of Tax Evasion

In this paper we analyze a tax evasion game with taxpayer learning by imitation. If the authority commits to a fixed auditing probability, a positive share of cheating is obtained in equilibrium. This stands in contrast to the existing literature that yields full compliance of audited taxpayer who are rational, have a lot of information and thus do not need to interact. When the authority adjusts auditing probability every period, cycling in cheating-auditing occurs. Thus, the real life phenomenon of compliance fluctuations is explained within the model rather than by exogenous parameter shifts.tax evasion; imitation; learning

Applications of Game Theory for Co-opetition at Marine Container Terminals

Applications of Game Theory for Co-opetition at Marine Container Terminal