A Game Theoretic Framework for Dynamic Standard Setting Procedures

Hoepfinger, E. & Avenhaus, R. (1978). A Game Theoretic Framework for Dynamic Standard Setting Procedures. IIASA Research Memorandum. IIASA, Laxenburg, Austria: RM-78-064

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Abstract

This paper presents a game-theoretic approach to modeling environmental standard setting procedures under specific consideration of the dynamic conflict situation in environmental decisions. Three idealized decision units are considered, the regulator, producer and impactee units: the regulator has to fix the standard. This standard causes a financial burden to the producer, who releases pollutants to the environment. By means of the standard the impactee has to be protected against this pollution.

The starting point is a multistage model for a non-cooperative three person game. After the description of this model the range of its application is indicated by the cases of North Sea oil, sulphur dioxide, carbon dioxide, and noise. Since any game-theoretic analysis includes the choice of a solution concept, a class of concepts is discussed. The last part of the paper contains a brief survey of the results of two multistage cases where the relevance of the solution concepts is demonstrated.

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