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Content archived on 2024-05-24

Archimedes 2001: mathematical modelling for social and economic sciences

Objective

The present research aimed at providing a model of an international system of tradable property rights. The model was then applied to evaluate certain aspects of the international system of green-house gas emission trading developing from the UN's Kyoto protocol. Important modifications of previous models (focusing primary on domestic systems ) were needed for this purpose - herein lies the main theoretical contribution. Such a research has particular European relevance for at least two reasons. First, as we shall see, it has a potentially important application in a European research field - game theoretical modeling of climate change agreements. Second, analysis of the environmental negotiation process can benefit the EU as one of the important negotiating parties.
Three key aspects of any system of tradable property rights are
(1) decision on the total quantity of permits,
(2) allocation of this quantity to participants, and
(3) characteristics of the market.
The first two of these tend to be ignored by the economics literature on tradable permits. My research focused on the interdependence between these three stages. The framework can be described as follows. Market characteristics. I considered three classical market settings that can be found in the literature on permit trading perfect competition, a market with transaction cost, and one where one of the participants had market power. Allocation. To model the allocation process, I used the tools of cooperative bargaining theory to create what I called the "Endowment game". This framework enable me to take participants' interests explicitly into account, and also to investigate various allocation principles. A 'fair' solution (where participants' gains were equalized), one featuring stability and equity (in the sense of J. Nash's famous axioms) and one achieving cost efficiency were considered. In previous approaches the bargaining aspect of the allocation problem had been igno

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Topic(s)

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Call for proposal

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Funding Scheme

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ACM - Preparatory, accompanying and support measures

Coordinator

GERGELY UJHELYI
EU contribution
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Total cost

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