Achieving international cooperation to address climate change is difficult, because there are significant free-rider incentives. Game theory, which analyses the mathematics of strategic behaviour, can help us obtain a better understanding of how the incentive to free-ride works, and identify the potential barriers to cooperation. Game Theory can also help us understand the behaviour of countries during international climate change negotiations.
Relevant areas of game theory include:
- Non-cooperative game theory, which helps us understand the behaviour of players who are non-cooperatively aiming to maximise their utility. Key frameworks include normal form games and extensive form games. Key solution concepts include the Nash equilibrium and the subgame perfect equilibrium.
- Cooperative game theory, which analyses the formation of coalitions, where players behave cooperatively withing the coalition, and non-cooperatively towards other coalitions. An important game theoretic concept is the core, which tells us about the stability of a grand coalition that consists of all players.
- Implementation theory treats a desired outcome as given, and analyses how to design a non-cooperative game whose solution corresponds to this outcome.
Some slides for a talk on climate change and game theory that was presented at the University of Copenhagen are here.