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Pledge-and-Review Bargaining

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  • Bård Harstad

Abstract

Real-world negotiations differ fundamentally from existing bargaining theory. Inspired by the Paris Agreement on climate change, this paper develops a novel bargaining game in which each party quanti.es its own contribution (to a public good, for example), before the set of pledges must be accepted. I first show that, if the tolerance for delay is uncertain, each equilibrium pledge coincides with an asymmetric Nash bargaining solution. The weights placed on others. payouts reflect the underlying uncertainty, but they vary from pledge to pledge, so the set of equilibrium pledges is inefficient. This bargaining outcome is embedded in a dynamic contribution game, with endogenous technology, participation, enforcement, and contract terms, to investigate when pledge-and-review bargaining is desirable. The model’s predictions can rationalize the key differences between the climate agreements signed in Kyoto (1997) and Paris (2015) as well as the development from the former to the latter.

Suggested Citation

  • Bård Harstad, 2018. "Pledge-and-Review Bargaining," CESifo Working Paper Series 7296, CESifo.
  • Handle: RePEc:ces:ceswps:_7296
    as

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    References listed on IDEAS

    as
    1. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
    2. Jeremy Bulow & Paul Klemperer, 2009. "Why Do Sellers (Usually) Prefer Auctions?," American Economic Review, American Economic Association, vol. 99(4), pages 1544-75, September.
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    Cited by:

    1. Roberto Serrano, 2020. "Sixty-Seven Years of the Nash Program: Time for Retirement?," Working Papers 2020-20, Brown University, Department of Economics.
    2. Roberto Serrano, 2021. "Sixty-seven years of the Nash program: time for retirement?," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 12(1), pages 35-48, March.
    3. Christoph Böhringer & Carsten Helm & Laura Schürer, 2023. "How to Boost Countries’ Climate Ambitions: Turning Gains from Emissions Trading into Gains for Climate," CESifo Working Paper Series 10624, CESifo.

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    More about this item

    Keywords

    dynamic games; bargaining games; Nash program; climate change; Paris Agreement; Kyoto Protocol;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation

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