Strategic Behavior and the Environment > Vol 7 > Issue 3–4

Strategic Environmental Policy, International Trade and Self-enforcing Agreements: The Role of Consumers' Taste for Variety

Michael Finus, Department of Economics, University of Bath, UK, m.finus@bath.ac.uk Alaa Al Khourdajie, School of Economics, University of Edinburgh, UK, alaa.alkhourdajie@ed.ac.uk
 
Suggested Citation
Michael Finus and Alaa Al Khourdajie (2018), "Strategic Environmental Policy, International Trade and Self-enforcing Agreements: The Role of Consumers' Taste for Variety", Strategic Behavior and the Environment: Vol. 7: No. 3–4, pp 317-350. http://dx.doi.org/10.1561/102.00000086

Published: 12 Feb 2018
© 2018 M. Finus and A. Al Khourdajie
 
Subjects
Environmental Economics:Climate Change,  Formal modelling,  Game theory
 
Keywords
JEL Codes: C72F18Q58
Strategic environmental policyInternational tradeSelf-enforcing international agreementsHorizontal product differentiationTaste for variety
 

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In this article:
Introduction
Model
Results
Concluding Remarks
Appendices
References

Abstract

We study the coordination of environmental policy within an agreement in the context of international trade. In an n-country intra-industry trade model, firms produce a horizontally differentiated good and consumers have a taste for variety. Governments choose strategically an emission tax and their membership in an international agreement. We show that only a strong taste for variety reduces the competition among governments sufficiently enough to allow for some form of policy coordination, though full cooperation will never be obtained.

DOI:10.1561/102.00000086

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Strategic Behavior and the Environment, Volume 7, Issue 3-4 International Environmental Agreements: Articles Overiew
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