The analysis of the behaviour of governments and producers in the presence of environmental regulations and international trade

Abstract

In my thesis I analyse the interactions between environmental regulations and international trade. I use a two-country, one-good, two-producer model. The governments may behave strategically in choosing their environmental policy and producers may behave strategically in choosing their R&D investment. Using a game theoretical approach, I try to identify the Nash equilibrium of the game. For identical countries, I consider two cases; simultaneous-move game and sequential-move game. I observe that the producers prefer not to act strategically for any action of governments. If one of the governments move in advance, it will prefer to act strategically. In a simultaneous-move game there is multiple equilibria and no conclusion can be made for the outcome of the game. For non-symmetric country case, I observe that the governments prefer to act strategically and the producers prefer not to act strategically where the game is a simultaneous-move game.