An iterative process for international negotiations on acid rain in Northern Europe using a general convex formulation

This paper proposes a game theoretical approach of international negotiations on transboundary pollution. This approach is distinguished by a discrete time formulation and by a suitable formulation of the local information assumption on cost and damage functions: at each stage of the negotiation, the parties assign the best possible cooperative state, given the available information, as an objective for the next stage. It is shown that the resulting sequences of states converges from a non-cooperative situation to an international optimum in a finite number of stages. Furthermore, a financial transfer structure is also presented that makes the desired sequence of states individually rational and stategically stable. The concepts are applied in a numerical simulation of the SO2 transboundary pollution problem related to acid rain in Northern Europe.