Abstract
Modeling transboundary pollutants in a dynamic game framework provides a foundation for analyzing the impact of various policy options. The focus of this analysis is on the results of a tax/subsidy scheme used to address the transboundary problem of global climate change. A nonzero-sum dynamic game with asymmetric players is used to evaluate the policy impact of the tax/subsidy scheme on the respective player′s value functions and strategies as determined by a Nash equilibrium feedback solution. The asymmetry of the players is reflected in their respective attitudes toward global climate change with one player benefiting from the change and the other losing.
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