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This chapter analyses the ‘tragedy of the commons’, which attributes the inefficiency in managing natural resources to the absence of well-defined property rights and the regime of open access that characterizes them. It discusses the problem of open access and problem of common property, the Pareto-inefficiency of the Nash equilibrium under common property, and the Lindahl equilibrium.

This chapter examines the properties of game-theoretic solutions in RICE through sensitivity analysis from an incentive perspective. The issues include intertemporal stability of the grand coalition under the Lindahl social welfare weights, the range of solutions with the core properties or having the Lindahl equilibrium properties, and incentive reactions to false perception of climate change by individual regions.

This chapter applies the game-theoretic solutions of RICE to some policy-related issues in climate change. It analyzes the difficulties confronted by unilateral actions such as the Kyoto Protocol from an incentive angle. It examines the sustainability of the Lindahl equilibrium solution under various unexpected shocks in economic/climate systems. It considers redistribution and transfer issues in greenhouse gas (GHG) mitigation policies from game-theoretic perspectives. Furthermore, the second-best properties of subcoalitions of GHG mitigations are inspected.

This chapter describes the RICE (Regional Integrated model of Climate and the Economy) model. It implements the cooperative game and its solution concepts in Chapter 2 into the RICE framework. It develops numerical algorithms for solving game-theoretic solutions in RICE in detail. In particular, it discusses the iterative procedures and incentive checking designed for searching the core allocations, the Lindahl equilibrium, and the Shapley value. These numerical algorithms are building blocks on the bridge that connects game-theoretic solution concepts with integrated assessment (IA) modeling.

One of the aims of this study is to bridge the gap between integrated assessment and game theoretic modeling. Within the framework of the RICE (Regional Integrated model of Climate and the Economy) model, this chapter examines various strategic and coalitional issues by seeking game-theoretic solutions of the model in this research. The framework of stock externality provision is formulated as a social planner’s optimal control problem. Climate change is a special application for the general formulation. A cooperative game of providing stock externality is then constructed as a bargaining process for shares in social welfare weights. Preparatory definitions and game-theoretic solutions in the context of the optimal control setting are introduced. Solution concepts, such as the Lindahl equilibrium and the Shapley value are defined in the dynamic setting.