In Barrett's (1994) paper on transboundary pollution abatement is shown that if the signatories of an international environmental agreement act in a Stackelberg fashion, then, depending on parameter values, a self-enforcing IEA can have any number of signatories between two and the grand coalition. Barrett obtains this result using numerical simulations and also ignoring the fact that emissions must be non-negative. Recent attempts to use analytical approaches and to explicitly recognize the non-negativity constraints have suggested that the number of signatories of a stable IEA may be very small. The way such papers have dealt with non-negativity constraints is to restrict parameter values to ensure interior solutions for emissions. We argue that a more appropriate approach is to use Kuhn-Tucker conditions to derive the equilibrium of the emissions game. When this is done we show, analytically, that the key results from Barrett's paper go through. Finally, we explain why his main conclusion is correct although his analysis can implicitly imply negative emissions.
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Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number
2004-23.
Find related papers by JEL classification: C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games D62 - Microeconomics - - Welfare Economics - - - Externalities F02 - International Economics - - General - - - International Economic Order; Noneconomic International Organizations;; Economic Integration and Globalization: General Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
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