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 negotiatio ns on transboundary pollution. This approach is distinguished by a discrete time formulation and by a suitable formulation of the local information as sumption on cost and damage functions: at each stage of the negotiation, th e parties assign the best possible cooperative state, given the available i nformation, as an objective for the next stage. It is shown that the result ing sequences of states converges from a non-cooperative situation to an in ternational optimum in a finite number of stages. Furthermore, a financial transfer structure is also presented that makes the desired sequence of sta tes individually rational and stategically stable. The concepts are applied in a numerical simulation of the SO2 transboundary pollution problem relat ed to acid rain in Northern Europe.