Potential Failure of an International Environmental Agreement under Asymmetric Information
AbstractThe free-riding issue is generally considered to be the biggest obstacle in the success of an international environmental agreement. Even without free-riding incentives, however, asymmetric information can pose a potentially significant threat in establishing a cooperative relationship. In this study, we examine perfect Bayesian equilibria of a simple signaling game between a polluter country and a victim country over an agreement to mitigate unidirectional transboudary pollution. Our results indicate that the stalemate in addressing an international environmental issue can be partly explained by the incentive conflict due to the asymmetric information on the environmental preference of a polluter.
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Bibliographic InfoPaper provided by School of Economics, Kwansei Gakuin University in its series Discussion Paper Series with number 22.
Length: 26 pages
Date of creation: Apr 2004
Date of revision: Apr 2004
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More information through EDIRC
asymmetric information; perfect Bayesian equilibrium; signaling game; unidirectional transboundary pollution; Victim pays principle;
Other versions of this item:
- Norimichi Matsueda, 2004. "Potential Failure of an International Environmental Agreement under Asymmetric Information," Economics Bulletin, AccessEcon, vol. 17(4), pages 1-8.
- Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
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- Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521311120, November.
- Claus Huber & Franz Wirl, 1996. "Optimal incentives to reduce transboundary emissions: Theory and empirical illustration to sulphur emissions in Austria and (former) Czechoslovakia," Empirica, Springer, vol. 23(2), pages 149-172, June.
- Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, June.
- Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521322249, November.
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