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Modesty Pays: Sometimes!

  • Michael Finus

    (Department of Economics, University of Hagen)

Standard non-cooperative game theoretical models of international environmental agreements (IEAs) draw a pessimistic picture of the prospective of successful cooperation: only small coalitions are stable that achieve only little. However, there also exist IEAs with higher participation and more success. In order to explain this phenomenon, this paper departs from the standard assumption of joint welfare maximization of coalition members, implying ambitious abatement targets and strong free-riding. Instead, it considers that countries agree on modest emission reduction targets. This may sufficiently raise participation so that the success of treaties improves in terms of global emission reduction and global welfare. Thus, modesty may pay, though the first best optimum cannot be achieved.

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Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2004.68.

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Date of creation: Apr 2004
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Handle: RePEc:fem:femwpa:2004.68
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  1. Alfred Endres & Michael Finus, 2002. "Quotas May Beat Taxes in a Global Emission Game," International Tax and Public Finance, Springer, vol. 9(6), pages 687-707, November.
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  8. Barrett, Scott, 1997. "The strategy of trade sanctions in international environmental agreements," Resource and Energy Economics, Elsevier, vol. 19(4), pages 345-361, November.
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  10. Finus, Michael & Rundshagen, Bianca, 1998. " Toward a Positive Theory of Coalition Formation and Endogenous Instrumental Choice in Global Pollution Control," Public Choice, Springer, vol. 96(1-2), pages 145-86, July.
  11. Michael Hoel & Kerstin Schneider, 1997. "Incentives to participate in an international environmental agreement," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 9(2), pages 153-170, March.
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  14. Carlo Carraro & Carmen Marchiori & Sonia Oreffice, 2003. "Endogenous Minimum Participation in International Environmental Treaties," Working Papers 2003.113, Fondazione Eni Enrico Mattei.
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  17. Carlo Carraro & Carmen Marchiori, 2003. "Stable coalitions," Chapters, in: The Endogenous Formation of Economic Coalitions, chapter 5 Edward Elgar.
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