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A Mechanism for Addressing Participation and Compliance for the Provision of Global Public Goods

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  • Finus, Michael
  • Kornek, Ulrike
  • Edenhofer, Ottmar

Abstract

In a three-stage global public good coalition formation game, Kornek and Edenhofer (2020) propose a transfer scheme in the spirit of mechanism design which allows to stabilize large coalitions, including the grand coalition. The transfer scheme addresses the free-rider problem in terms of participation. In order to address the free-rider problem in terms of compliance with transfer obligations, they propose a deposit-refund scheme in the spirit of Gerber and Wichardt (2009) and others. However, McEvoy and McGinty (2023) argue in a comment that the compliance issue has not yet been solved because signatories would have neither an incentive to pay the deposit nor the transfer. In this paper, we show how to modify the original proposal in KE (2020) to render compliance an equilibrium choice. We also demonstrate that the transfer scheme retains its desirable properties when considering asymmetric countries. It emerges that it is promising to generalize further the setting of Kornek and Edenhofer (2020).

Suggested Citation

  • Finus, Michael & Kornek, Ulrike & Edenhofer, Ottmar, 2026. "A Mechanism for Addressing Participation and Compliance for the Provision of Global Public Goods," CEPR Discussion Papers 21990, Centre for Economic Policy Research.
    • Handle: RePEc:cpr:ceprdp:21990
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    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • H41 - Public Economics - - Publicly Provided Goods - - - Public 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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