Transboundary Fire and Haze Games: Local Capture and Common Agency

We study how transboundary, intergovernmental .re and haze negotiations interact with local, subnational government collusion and capture in a decentralized country. The local go- vernment collusion and capture problem is modelled as a competing principals and common agency problem that interacts with the central government’s game of chicken. The results show that the central government can persuade farmers and prevent burning when the incre- mental benefits from slashing and burning are lower, the total direct and indirect costs and damages of fire and haze are higher and the required enforcement and abatement costs are not too high. Neighbouring governments can help mitigate the central government’s budget constraint and deter or punish violating multinational companies. We develop a multitask multiprincipal framework to expand our solution set to include partial burning outcomes and negative compensations. The results inform on a set of policy strategies to these complex transboundary fire and haze negotiation and local capture problems.