Essays on externalities and international cooperation : a game theoretic approach

Abstract

In this dissertation, I present three essays which examine questions in the field of public economics using a game theoretic approach, and I derive hopeful results and helpful rules for international negotiation. In my first chapter, I examine minimum participation constraints. In the presence of heterogeneity, a minimum participation (MP) clause in a public goods arrangement can serve as a device to create a more homogeneous group. When coalitions are restricted in what they can bargain over, exclusion of some agents from the bargaining process can be Pareto improving. This paper gives a general set of sufficient conditions for such an exclusion result to hold, and presents examples of when exclusion does, and does not, improve upon unanimity. In the second chapter, I discuss the problem of determining which externality situations merit international cooperation. I create a general framework of linearized parameters to examine a general externality problem, and then I provide the sufficient conditions for a parameter to move non-cooperative and cooperative solutions in opposite directions under certain circumstances. I argue that situations which behave in this manner and which have a higher parameter value have more benefit to cooperation through the increased range in actions to bargain over. The third chapter extends upon the second chapter and applies the framework developed to an externality problem. I present a particular story of correlation in fish growth and a corresponding model which gives an example of an increasing action gap. I describe the method of use of the framework, and using the linearized parameters developed in the second chapter, I attempt to show the divergence of non-cooperative and cooperative actions in this setting, demonstrating the need for negotiation among sovereign entities.