Economic Modeling of the Regional Polices to Combat Dust Phenomenon by Using Game Theory

Abstract

In recent years, dust phenomenon as an environmental externality has affected Iran and other Middle East countries. The major parts of dust which has polluted Iran's atmosphere, mainly comes from Iraq. This dust phenomenon has also had a lot of economic and social damages for these two countries. The main aim of this study is to analyse the advantages of cooperation between Iran and Iraq against this phenomenon. The significant damage of this phenomenon has been estimated on health and hygiene, transportation and agriculture sections. The expenditure in contrast with this problem has also been calculated in the crucial zone of creation dust. According to the estimation of this study, total damages of dust for Iran and Iraq are 1043.5 and 1404 million dollars, respectively. While the cost of solving this problem is about 2425.7 million dollars. By applying cooperative games theory, the cooperation between Iran and Iraq to combat dust phenomenon has been analysed. Net benefits of these two countries has been calculated in two cooperation games and their characteristic functions has been derived. Then by using Shapley solution, outcome benefits have been distributed between these two countries. The results suggest that the net benefits of two countries will increase if they associate with each other. In the meantime, based on the results of coalition, a fairly allocation has also been used for costs which has been utilized against dust phenomenon between Iran and Iraq. So these two countries should spend 1442.6 and 1082.1 million dollars to conquer this phenomenon, respectively. The managers of Iranian environmental protection organization should have more effective cooperation with Iraq to resolve dust problem by using diplomatic means and provide parts of its cost by side payments.