We examine the formation of International Environmental Agreements (IEAs). We extend the existing literature by endogenizing the reaction of the IEA's members to a deviation by a member or a group of members. We assume that when a country contemplates exiting or joining an agreement, it takes into account the reactions of other countries ignited by its own actions. We identify conditions under which there always exists a unique set of farsighted stable IEAs. The new farsighted IEAs can be much larger than those some of the previous models supported but are not always Pareto efficient. We extend the analysis to allow for coordinated action, that is, groups of countries jointly exiting or entering the agreement and fully characterize the coalitionally farsighted stable IEAs.
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Paper provided by School of Economics and Management, University of Aarhus in its series Economics Working Papers with number
2002-10.
Find related papers by JEL classification: Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General H41 - Public Economics - - Publicly Provided Goods - - - Public Goods C79 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Other
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