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International environmental agreements with mixed strategies and investment

  • Hong, Fuhai

    ()

    (School of Economics, Shanghai University of Finance and Economics)

  • Karp, Larry

    ()

    (University of California, Berkeley. Dept of agricultural and resource economics)

We modify a canonical participation game used to study International Environmental Agreements (IEA), considering both mixed and pure strategies at the participation stage, and including a prior cost-reducing investment stage. The use of mixed strategies at the participation stage reverses a familiar result and also reverses the policy implication of that result: with mixed strategies, equilibrium participation and welfare is higher in equilibria that involve higher investment.

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Paper provided by University of California at Berkeley, Department of Agricultural and Resource Economics and Policy in its series CUDARE Working Paper Series with number 1129.

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Length: 35 pages
Date of creation: May 2012
Date of revision:
Handle: RePEc:are:cudare:1129
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