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Global Public Good Agreements with Fixed Costs

Author

Listed:
  • Michael Finus

    (University of Graz, Austria)

  • Francesco Furini

    (University of Hamburg, Germany)

Abstract

We analyze a two-stage coalition formation game in which the provision of the global public good is not only associated with variable costs but also with fixed costs. We consider the assumptions that signatories share or do not share fixed costs. We show that fixed costs may imply corner solutions for equilibrium public good provision levels and generate several different coalition formation scenarios. Some scenarios are a game changer in that stable agreements and global welfare gains from cooperation are large. That is, the well-known conclusion about the “paradox of cooperation†may break down in the light of fixed costs.

Suggested Citation

  • Michael Finus & Francesco Furini, 2024. "Global Public Good Agreements with Fixed Costs," Graz Economics Papers 2024-18, University of Graz, Department of Economics.
    • Handle: RePEc:grz:wpaper:2024-18
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    More about this item

    Keywords

    Global Public Good Provision; International Treaties; Coalition Stability; Fixed Costs.;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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