Josef Janssen (Institute for Economy and the Environment at the University of St. Gallen (IWO-HSG), Switzerland and Fondazione Eni Enrico Mattei, Milan, Italy)
Abstract
International climate protection investments (Joint Implementation and Clean Development Mechanism projects) are burdened with problems of contract enforcement, which prevent the realisation of efficiency gains associated with these investments. The paper analyses this problem from the perspective of non-cooperative game theory and proposes two different solutions to the co-operation problem. The first analyses the potential role of national environmental authorities in facilitating credible commitment of the project host operating under its jurisdiction. It is argued that the threat of punishing the project host if he breaches the contract may serve this purpose. The effective level of punishment is derived. The second option involves strategic delegation of contract implementation to a third party operating under the same jurisdiction as the project host. Again, the paper explores the conditions that ensure incentive-compatibility. Both options are based on the idea that the project sponsor may commit himself credibly by becoming a Stackelberg leader.
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Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number
1999.14.
Find related papers by JEL classification: D21 - Microeconomics - - Production and Organizations - - - Firm Behavior D62 - Microeconomics - - Welfare Economics - - - Externalities D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General F20 - International Economics - - International Factor Movements and International Business - - - General F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business K12 - Law and Economics - - Basic Areas of Law - - - Contract Law K40 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - General Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Fershtman, Chaim & Judd, Kenneth L & Kalai, Ehud, 1991.
"Observable Contracts: Strategic Delegation and Cooperation,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(3), pages 551-59, August.
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