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Signaling in international environmental agreements: the case of early and delayed action

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  • Michael Jakob
  • Kai Lessmann

Abstract

This paper presents a stylized international environmental agreements game with two regions differing in their preference for environmental quality. If side payments are allowed, cooperation can increase the payoffs accruing to both regions. However, cooperation can be impeded by asymmetric information about the regions’ types and only become feasible once a region has credibly revealed its type. We show how in a two-stage game early (delayed) action can act as a credible signal to reveal private information on high (low) benefits. Yet, the cooperative solution with asymmetric information is Pareto-dominated by the outcome with perfect information. Copyright Springer Science+Business Media B.V. 2012

Suggested Citation

  • Michael Jakob & Kai Lessmann, 2012. "Signaling in international environmental agreements: the case of early and delayed action," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 12(4), pages 309-325, November.
  • Handle: RePEc:spr:ieaple:v:12:y:2012:i:4:p:309-325
    DOI: 10.1007/s10784-012-9170-5
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    5. Gregor Schwerhoff, 2013. "Leadership and International Climate Cooperation," Working Papers 2013.97, Fondazione Eni Enrico Mattei.
    6. Jakob, Michael, 2021. "Climate policy and international trade – A critical appraisal of the literature," Energy Policy, Elsevier, vol. 156(C).
    7. Ottmar Edenhofer & Christian Flachsland, 2012. "Die Nutzung globaler Gemeinschaftsgüter: Politökonomische Herausforderungen an die Klimapolitik," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 65(12), pages 29-35, June.
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    9. Fuhai Hong, 2014. "Technology transfer with transboundary pollution: A signalling approach," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 47(3), pages 953-980, August.

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