International Trade and the Environment
International Trade and the Environment
This chapter applies evolutionary games to environmental economics and international trade. It shows how evolutionary game theory can be used for policy analysis. Beginning with the standard static Cournot model to represent short-run adjustment of output quantities, it applies monotone dynamics to the longer-run shares of firms that adopt clean or dirty technologies, and shows how Pigovian taxes and other policy interventions can shift the equilibrium towards a more efficient outcome. The chapter then considers how firms chose among alternative forms of internal organization, as they compete with other domestic and/or foreign firms. Taxes and other policy interventions can alter the stable states seen in the longer run, and potentially achieve environmental and economics policy goals.
Keywords: Cournot competition, tragedy of the commons, green technology, Japanese flexible organization, monotone dynamics, pollution tax, trade policy, environmental policy, public goods, comparative advantage
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