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Endogenous Timing in Pollution Control: Stackelberg versus Cournot-Nash Equilibria
The paper analyzes the strategic interactions between countries in pollution control, comparing simultaneous (Cournot-Nash) and sequential (Stackelberg) move equilibria. By introducing a pre-play stage where countries choose their timing, the author demonstrates that while simultaneous play is prevalent when strategies are substitutable, a leader can emerge endogenously when strategic complementarities exist. The study finds that sequential play under complementarity leads to lower global emissions and higher welfare than simultaneous play. The analysis utilizes supermodular game theory to avoid restrictive assumptions like concavity or uniqueness of equilibria.
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Document type: Research paper