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Climate Change and Common SenseEssays in Honour of Tom Schelling$
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Robert W. Hahn and Alistair Ulph

Print publication date: 2012

Print ISBN-13: 9780199692873

Published to Oxford Scholarship Online: May 2012

DOI: 10.1093/acprof:oso/9780199692873.001.0001

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PRINTED FROM OXFORD SCHOLARSHIP ONLINE (oxford.universitypressscholarship.com). (c) Copyright Oxford University Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in OSO for personal use. date: 08 December 2021

The Cost of Ambiguity and Robustness in International Pollution Control

The Cost of Ambiguity and Robustness in International Pollution Control

Chapter:
(p.75) 6 The Cost of Ambiguity and Robustness in International Pollution Control
Source:
Climate Change and Common Sense
Author(s):

Anastasios Xepapadeas

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780199692873.003.0006

Robust policy rules and precaution might be called for, under conditions of scientific uncertainty, when a policy maker is concerned about possible misspecification of the natural system that is used to model pollution dynamics. Precaution, however, could be costly. The present chapter develops a conceptual framework for designing robust policy rules and estimating the cost of being precautious in the context of an international pollution control problem. Cooperative and non-cooperative robust policy rules are determined and the cost, in terms of value loss, of being robust relative to conventional policy rules is estimated.

Keywords:   ambiguity, robustness, precaution, differential games, open loop, feedback Nash equilibrium

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