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Climate Change in a Public Goods Game: Investment Decision in Mitigation versus Adaptation

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  • Hasson, Reviva

    (Department of Economics, Faculty of Commerce, University of Cape Town)

  • Löfgren, Åsa

    (Department of Economics, School of Business, Economics and Law, Göteborg University)

  • Visser, Martine

    (Department of Economics, Faculty of Commerce, University of Cape Town)

Abstract

We use behavioral and experimental economics to study a particular aspect of the economics of climate change: the potential tradeoff between countries’ investments in mitigation versus adaptation. While mitigation of greenhouse gases can be viewed as a public good, adaptation to climate change is a private good, benefiting only the country or the individual that invests in adaptation. We use a one-shot public-goods game that deviates from the standard public-goods game by introducing a stochastic term to account for probabilistic destruction in a climate-change setting. Probability density function is mapped to within-group levels of mitigation. We compare low-vulnerability and high-vulnerability treatments by varying the magnitude of disaster across treatments. Our results show that there is no significant difference in the level of mitigation across these treatments. Further, our results emphasize the important role of trust in enhancing cooperation.

Suggested Citation

  • Hasson, Reviva & Löfgren, Åsa & Visser, Martine, 2009. "Climate Change in a Public Goods Game: Investment Decision in Mitigation versus Adaptation," Working Papers in Economics 416, University of Gothenburg, Department of Economics.
  • Handle: RePEc:hhs:gunwpe:0416
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    More about this item

    Keywords

    Public good; climate change; mitigation; adaptation; experiment; risk;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • 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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