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Participation Games and international environmental agreements: a nonparametric 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 onthese 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 abatementcosts 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

Paper provided by Department of Agricultural & Resource Economics, UC Berkeley in its series Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series with number qt5693n1nf.

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Date of creation: 13 Feb 2012
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Handle: RePEc:cdl:agrebk:qt5693n1nf

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Keywords: Life Sciences; Social and Behavioral Sciences; stable coalitions; participation games; International Environmental Agreement; climate agreement; trans-boundary pollution; investment spillovers;

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Cited by:
  1. Karp, Larry & Stevenson, Megan, 2012. "Green industrial policy : trade and theory," Policy Research Working Paper Series 6238, The World Bank.
  2. Hong, Fuhai & Karp, Larry, 2012. "International Environmental Agreements with mixed strategies and investment," Journal of Public Economics, Elsevier, vol. 96(9-10), pages 685-697.
  3. Thomas Eichner & Rüdiger Pethig, 2013. "Trade Tariffs and Self-Enforcing Environmental Agreements," CESifo Working Paper Series 4464, CESifo Group Munich.
  4. Fuhai HONG & Larry KARP, 2013. "International Environmental Agreements with Endogenous or Exogenous Risk," Economic Growth centre Working Paper Series 1310, Nanyang Technolgical University, School of Humanities and Social Sciences, Economic Growth centre.
  5. Ngo Van Long, 2014. "The Green Paradox in Open Economies," CESifo Working Paper Series 4639, CESifo Group Munich.
  6. 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.

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