Uncertainty and learning in a strategic environment: global climate change

Global climate change is rife with uncertainties. Yet, we can expect to resolve much of this uncertainty in the next 100 years or so. Therefore, current actions should reflect the value of flexibility. Nevertheless, most models of climate change, particularly game-theoretic models, abstract from uncertainty. A model of the impacts of uncertainty and learning in a non-cooperative game shows that the level of correlation of damages across countries is crucial for determining optimal policy. (C) 2004 Elsevier B.V. All rights reserved.