Unilateral Actions the Case of International Environmental Problems



10. Appendixes

Appendix 1

NBi =Bi(qi,qj)-C(qi), i=1,2.

Bi'(q) 0 and Bi''(q) 0 while Ci'(qi) 0 and Ci''(qi) 0 .

Comparative static. Suppose that a is some parameter that shifts the net benefit
function of country 1. The Nash equilibrium is described by the conditions:

dNB1( q 1( a ), q 2( a ), a ) = 0

dq ι

dNB 2( qι( a ), q 2( a )) = 0

dq 2

Differentiating these equations with respect to a gives us the system

'2 NB1   2 NB1 '

dq ι2     dq ιdq 2

I q 1 q 2     q 2 J

'q ^] C ∂2 NB, Ï
a = -
dq 2       dq'sa

(Ba J ^   0 j

Applying Cramer’s rule, we have

2NB1 2NB1

dq ι =

a

q1 a q1 a

0     2 NB 2

q22

2NB1   2NB1

q 12     q 1 q 2

2 NB 2 2 NB 2
q1 q2     q22

40



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