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Participation and Duration of Environmental Agreements

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  • Marco Battaglini
  • Bård Harstad

Abstract

We analyze participation in international environmental agreements (IEAs) in a dynamic game where countries pollute and invest in green technologies. If complete contracts are feasible, participants eliminate the hold-up problem associated with their investments; however, most countries prefer to free-ride rather than participate. If investments are non-contractible, countries face a hold-up problem every time they negotiate; but the free-rider problem can be mitigated and significant participation is feasible. Participation becomes attractive because only large coalitions commit to long-term agreements that circumvent the hold-up problem. Under well-specified conditions even the first-best outcome is possible when the contract is incomplete. Since real-world IEAs fit in the incomplete contracting environment, our theory may help explaining the rising importance of IEAs and how they should be designed.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18585.

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Date of creation: Dec 2012
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Handle: RePEc:nbr:nberwo:18585

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Cited by:
  1. Rodrigo Harrison & Roger Laguno ff, 2013. "Dynamic Mechanism Design for a Global Commons," Levine's Working Paper Archive 786969000000000831, David K. Levine.

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