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Participation games and international environmental agreements: A non-parametric model

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  • Karp, Larry
  • Simon, Leo

Abstract

We examine the size of stable coalitions in a participation game that has been used to model international environmental agreements, cartel formation, R&D spillovers, and monetary policy. The literature to date has relied on parametric examples; based on these examples, a consensus has emerged that in this kind of game, the equilibrium coalition size is small, except possibly when the potential benefits of cooperation are also small. In this paper, we develop a non-parametric approach to the problem, and demonstrate that the conventional wisdom is not robust. In a general setting, we identify conditions under which the equilibrium coalition size can be large even when potential gains are large. Contrary to previously examined leading special cases, we show that reductions in marginal abatement costs in an international environmental game can increase equilibrium membership, and we provide a measure of the smallest reduction in costs needed to support a coalition of arbitrary size.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Environmental Economics and Management.

Volume (Year): 65 (2013)
Issue (Month): 2 ()
Pages: 326-344

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Handle: RePEc:eee:jeeman:v:65:y:2013:i:2:p:326-344

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Web page: http://www.elsevier.com/locate/inca/622870

Related research

Keywords: Stable coalitions; Participation game; International environmental agreement; Climate agreement; Trans-boundary pollution; Investment spillovers;

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References

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Citations

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Cited by:
  1. Hong, Fuhai & Karp, Larry, 2012. "International Environmental Agreements with Mixed Strategies and Investment," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt0xf976x1, Department of Agricultural & Resource Economics, UC Berkeley.
  2. Thomas Eichner & Rüdiger Pethig, 2013. "Trade tariffs and self-enforcing environmental agreements," Volkswirtschaftliche Diskussionsbeiträge 161-13, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht.
  3. Maruta, Toshimasa & Okada, Akira, 2014. "The Formation and Long-run Stability of Cooperative Groups in a Social Dilemma Situation," Discussion Papers 2014-03, Graduate School of Economics, Hitotsubashi University.
  4. Karp, Larry & Stevenson, Megan, 2012. "Green industrial policy : trade and theory," Policy Research Working Paper Series 6238, The World Bank.
  5. Ngo Van Long, 2014. "The Green Paradox in Open Economies," CESifo Working Paper Series 4639, CESifo Group Munich.

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