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Enforcing Compliance with Environmental Agreements in the Absence of Strong Institutions: An Experimental Analysis

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  • Todd Cherry

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  • David McEvoy

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Abstract

This paper uses laboratory experiments to evaluate the performance of a deposit-refund mechanism used to enforce compliance with voluntary public-good commitments made in the absence of strong regulatory institutions. With this mechanism agents decide whether to join an agreement and pay a deposit prior to making their contribution decisions. If an agreement receives sufficient membership to form, members then make their contribution decisions and compliant members are refunded their deposits. If an agreement does not form, then deposits are immediately refunded and a standard voluntary contribution game is played. We find that the deposit-refund mechanism achieves nearly full efficiency when agreements require full participation, but is far less effective, and in some cases disruptive, when agreements require only partial participation. As the mechanism does not require the existence of strong sanctioning institutions, it is particularly suited for enforcing compliance with international environmental agreements. Copyright Springer Science+Business Media B.V. 2013

Suggested Citation

  • Todd Cherry & David McEvoy, 2013. "Enforcing Compliance with Environmental Agreements in the Absence of Strong Institutions: An Experimental Analysis," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 54(1), pages 63-77, January.
  • Handle: RePEc:kap:enreec:v:54:y:2013:i:1:p:63-77
    DOI: 10.1007/s10640-012-9581-3
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Gersbach, Hans & Hummel, Noemi, 2016. "A development-compatible refunding scheme for a climate treaty," Resource and Energy Economics, Elsevier, vol. 44(C), pages 139-168.
    2. Federica Alberti & Edward J. Cartwright, 2016. "Full agreement and the provision of threshold public goods," Public Choice, Springer, vol. 166(1), pages 205-233, January.
    3. Tatsuya Sasaki & Isamu Okada & Satoshi Uchida & Xiaojie Chen, 2015. "Commitment to Cooperation and Peer Punishment: Its Evolution," Games, MDPI, Open Access Journal, vol. 6(4), pages 1-14, November.
    4. Jon Hovi & Hugh Ward & Frank Grundig, 2015. "Hope or Despair? Formal Models of Climate Cooperation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 62(4), pages 665-688, December.
    5. repec:kap:enreec:v:70:y:2018:i:2:d:10.1007_s10640-017-0123-x is not listed on IDEAS
    6. David McEvoy, 2013. "Enforcing compliance with international environmental agreements using a deposit-refund system," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 13(4), pages 481-496, November.

    More about this item

    Keywords

    Enforcing compliance; Environmental agreements; Experimental economics; Deposit refund; International environmental agreements; D02; Q50; H41; H87; C90;

    JEL classification:

    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General

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