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In this paper we examine the stability of international environmental agreements about a (common) emissions target. By signing the agreement, the parties develop a sense of responsibility to the commitment made, gaining a self-image that contributes to their utility. We study a dynamic two-stage game where all countries act individualistically. We investigate how two fundamental components of the model, that is, the ambition of the pledge and the relative importance given to compliance to the commitment, affect the stability and efficiency of the agreement in terms of global welfare and total emissions. We find that participation is the key driver of all the results and that it is negatively related to the ambition of the pledge and positively related to countries' level of concern about environmental issues. [ABSTRACT FROM AUTHOR]

In this article, single product Cournot oligopolies are considered, where the demand and cost functions are linear. While cost functions are completely known by all firms, they only partially know the demand function, as they misspecify the slope. At any stage of the repeated oligopoly game firms update the slope of their subjective demand functions on the basis of the discrepancy they observe between the expected price, computed according to believed demand, and the price they actually observe. This adjustment process has a unique steady state, where any subjective demand function coincides with the true demand function. If such steady state is stable, then the true slope of the demand function can be learned by all oligopolists, even if they start from misspecified initial guesses. Sufficient conditions for the stability of the steady state are given for n-firms oligopolies. In the particular case of a duopoly, an exact delimitation of the stability region in the parameters' space is given, and with the help of numerical simulations, the size and the shape of the basins of attraction is analysed, as well as the kinds of attracting sets that characterise the long-run dynamics of the learning process when the steady state is unstable. [ABSTRACT FROM AUTHOR]

Abstract: We propose an oligopoly game where quantity setting firms have incomplete information about the demand function. At each time step they solve a profit maximization problem assuming a linear demand function and ignoring the effects of the competitors’ outputs. Despite such a rough approximation, that we call “Local Monopolistic Approximation” (LMA), the repeated game may converge at a Nash equilibrium of the game played under the assumption of full information. An explicit form of the dynamical system that describes the time evolution of oligopoly games with LMA is given for arbitrary differentiable demand functions, provided that the cost functions are linear or quadratic. In the case of isoelastic demand, we show that the game based on LMA always converges to a Nash equilibrium. This result, compared with “best reply” dynamics, shows that in this particular case less information implies more stability. [Copyright &y& Elsevier]