Global Warming has emerged as the most important environmental issue of our times and one with potentially dramatic consequences for all future generations. Although its technological causes and consequences are being currently studied intensively, there has been much less attention devoted to the attendant economic and strategic questions. The first part of this project analyzes global warming from the perspective of dynamic games. It is argued that several outstanding features of the problem irreversibility, the global common, the regional level (at which negotiations have taken place thus far) suggest a Markovian commons game as a natural framework for analysis. At the same time, in order to analyze global warming the existing theory must be refined and generalized in several directions. A Mechanism Design perspective must be included since the rules of the game are not cast in stone and the many asymmetries must be addressed such as emissions source, level of development, climate costs, etc. that underpin the problem. The second part of the project poses a program of theoretical research on Markovian games and their applications.. Although the framework of Markovian games has been widely employed in recent applications in economics, business, and political science, somewhat remarkably, very little is known in general about equilibria in such games. It is hoped that the present project will contribute toward a more rapid discovery of general results in this area, thereby facilitating further applications of the theory. Methodologically, the two halves of the proposal are unified by their dynamic game perspective. It is also anticipated that numerical methods will be employed in the analysis in both parts; such methods are currently rare in dynamic game analyses.
