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Participation Games and international environmental agreements: a nonparametric model

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  • Karp, Larry
  • Simon, Leo

Abstract

We examine the size of stable coalitions in a participation game that has been used to model international environmental agreements, cartel formation, R&D spillovers, and monetary policy. The literature to date has relied on parametric examples; based onthese examples, a consensus has emerged that in this kind of game, the equilibrium coalition size is small, except possibly when the potential benefits of cooperation are also small. In this paper, we develop a non-parametric approach to the problem, and demonstrate that the conventional wisdom is not robust. In a general setting, we identify conditions under which the equilibrium coalition size can be large even when potential gains are large. Contrary to previously examined leading special cases, we show that reductions in marginal abatementcosts in an international environmental game can increase equilibrium membership, and we provide a measure of the smallest reduction in costs needed to support a coalition of arbitrary size.

Suggested Citation

  • Karp, Larry & Simon, Leo, 2012. "Participation Games and international environmental agreements: a nonparametric model," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt5693n1nf, Department of Agricultural & Resource Economics, UC Berkeley.
  • Handle: RePEc:cdl:agrebk:qt5693n1nf
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    Cited by:

    1. Hong, Fuhai & Karp, Larry, 2012. "International Environmental Agreements with mixed strategies and investment," Journal of Public Economics, Elsevier, vol. 96(9-10), pages 685-697.
    2. Ngo Van Long, 2014. "The Green Paradox in Open Economies," CESifo Working Paper Series 4639, CESifo Group Munich.
    3. Thomas Eichner & Rüdiger Pethig, 2013. "Trade tariffs and self-enforcing environmental agreements," Volkswirtschaftliche Diskussionsbeiträge 161-13, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht.
    4. Marco Battaglini & Bård Harstad, 2016. "Participation and Duration of Environmental Agreements," Journal of Political Economy, University of Chicago Press, vol. 124(1), pages 160-204.
    5. Chen, Xudong & Huang, Bihong, 2016. "Club membership and transboundary pollution: Evidence from the European Union enlargement," Energy Economics, Elsevier, vol. 53(C), pages 230-237.
    6. Karp, Larry & Stevenson, Megan, 2012. "Green industrial policy : trade and theory," Policy Research Working Paper Series 6238, The World Bank.
    7. 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, vol. 1(3), pages 365-394.
    8. repec:eee:jeeman:v:85:y:2017:i:c:p:1-20 is not listed on IDEAS
    9. Kai Lessmann & Ulrike Kornek & Valentina Bosetti & Rob Dellink & Johannes Emmerling & Johan Eyckmans & Miyuki Nagashima & Hans-Peter Weikard & Zili Yang, 2015. "The Stability and Effectiveness of Climate Coalitions," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 62(4), pages 811-836, December.
    10. Maruta, Toshimasa & Okada, Akira, 2014. "The Formation and Long-run Stability of Cooperative Groups in a Social Dilemma Situation," Discussion Papers 2014-03, Graduate School of Economics, Hitotsubashi University.
    11. 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.
    12. Hassan Benchekroun & Amrita Ray Chaudhuri, 2015. "Cleaner Technologies and the Stability of International Environmental Agreements," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(6), pages 887-915, December.
    13. Eichner, Thomas & Pethig, Rüdiger, 2017. "Self-enforcing environmental agreements and trade in fossil energy deposits," Journal of Environmental Economics and Management, Elsevier, vol. 85(C), pages 1-20.
    14. Helm, Carsten & Schmidt, Robert C., 2015. "Climate cooperation with technology investments and border carbon adjustment," European Economic Review, Elsevier, vol. 75(C), pages 112-130.
    15. repec:bla:pacecr:v:22:y:2017:i:3:p:435-479 is not listed on IDEAS

    More about this item

    Keywords

    Life Sciences; Social and Behavioral Sciences; stable coalitions; participation games; International Environmental Agreement; climate agreement; trans-boundary pollution; investment spillovers;

    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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