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Coarse correlated equilibria in an abatement game

Research output: Working paper

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Publication date2014
Place of PublicationLancaster
PublisherLancaster University, Department of Economics
Number of pages17
<mark>Original language</mark>English

Publication series

NameEconomics Working Paper Series
No.24
Volume2014

Abstract

We consider the well-analyzed abatement game (Barrett 1994) and prove that correlation among the players (nations) can strictly improve upon the Nash equilibrium payoffs. As these games are potential games, correlated equilibrium — CE — (Aumann 1974, 1987) cannot improve upon Nash; however we prove that coarse correlated equilibria — CCE — (Moulin and Vial 1978) may do so. We compute the largest feasible total utility and hence the efficiency gain in any CCE in those games: it is achieved by a lottery over only two pure strategy profiles.