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International Environmental Agreements with Mixed Strategies and Investment

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  • Hong, Fuhai
  • Karp, Larry

Abstract

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 alsoreverses the policy implication of that result: with mixed strategies, equilibriumparticipation and welfare is higher in equilibria that involve higher investment.

Suggested Citation

  • Hong, Fuhai & Karp, Larry, 2012. "International Environmental Agreements with Mixed Strategies and Investment," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt0xf976x1, Department of Agricultural & Resource Economics, UC Berkeley.
  • Handle: RePEc:cdl:agrebk:qt0xf976x1
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Carlo Carraro, 2014. "International environmental cooperation," Chapters,in: Handbook of Sustainable Development, chapter 26, pages 418-431 Edward Elgar Publishing.
    2. Hong, Fuhai & Lim, Wooyoung, 2016. "Voluntary participation in public goods provision with Coasian bargaining," Journal of Economic Behavior & Organization, Elsevier, vol. 126(PA), pages 102-119.
    3. El-Sayed, Abeer & Rubio, Santiago J., 2014. "Sharing R&D investments in cleaner technologies to mitigate climate change," Resource and Energy Economics, Elsevier, pages 168-180.
    4. Karp, Larry & Simon, Leo, 2013. "Participation games and international environmental agreements: A non-parametric model," Journal of Environmental Economics and Management, Elsevier, pages 326-344.
    5. Hong, Fuhai, 2015. "International Environmental Agreements with reference points," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 59(C), pages 68-73.
    6. By Thomas Eichner & Rüdiger Pethig, 2015. "Self-enforcing international environmental agreements and trade: taxes versus caps," Oxford Economic Papers, Oxford University Press, vol. 67(4), pages 897-917.
    7. Johan Eyckmans & Sam Fankhauser & Snorre Kverndokk, 2016. "Development Aid and Climate Finance," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 63(2), pages 429-450, February.
    8. repec:eee:jeeman:v:84:y:2017:i:c:p:173-188 is not listed on IDEAS
    9. Helm, Carsten & Schmidt, Robert C., 2015. "Climate cooperation with technology investments and border carbon adjustment," European Economic Review, Elsevier, pages 112-130.
    10. Julia Blasch & Nina Boogen & Nilkanth Kumar & Massimo Filippini, 2017. "The role of energy and investment literacy for residential electricity demand and end-use efficiency," CER-ETH Economics working paper series 17/269, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    11. Hans Gersbach & Marie-Catherine Riekhof, 2017. "Technology Treaties and Climate Change," CER-ETH Economics working paper series 17/268, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    12. Fuhai Hong & Larry Karp, 2014. "International Environmental Agreements with Endogenous or Exogenous Risk," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, pages 365-394.
    13. Johan Eyckmans & Sam Fankhauser & Snorre Kverndokk, 2013. "Equity, Development Aid and Climate Finance," GRI Working Papers 123, Grantham Research Institute on Climate Change and the Environment.

    More about this item

    Keywords

    Life Sciences; Social and Behavioral Sciences; International Environmental Agreement; climate agreement; participation games; investment; mixed strategy;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • H4 - Public Economics - - Publicly Provided Goods
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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