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Asymmetry, optimal transfers and international environmental agreements

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  • Jonathan Colmer

Abstract

This paper applies optimal sharing rules to a coalition formation game with positive externalities, demonstrating the effectiveness of well-designed transfer schemes in improving outcomes for participation in International Environmental Agreements. A numerical exercise is conducted, providing proof of the failure of the conventional transfer schemes (Shapley value, Nash bargaining solution, Chander Tulkens transfer scheme) to meet the existence, robustness and optimality conditions set by the optimal sharing rule literature. The core result is derived from a systematic analysis of the effect that the degree of full, mean-preserving asymmetry on the formation of stable self-enforcing coalitions, under two dfferent conditions: transfers and no transfers. The effectiveness of, and participation in, International Environmental Agreements is found to increase with the degree of asymmetry under the optimal sharing rule.

Suggested Citation

  • Jonathan Colmer, 2011. "Asymmetry, optimal transfers and international environmental agreements," GRI Working Papers 66, Grantham Research Institute on Climate Change and the Environment.
  • Handle: RePEc:lsg:lsgwps:wp66
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    File URL: http://www.lse.ac.uk/GranthamInstitute/wp-content/uploads/2014/02/WP66_asymmetry-transfers-environmental.pdf
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    References listed on IDEAS

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    Cited by:

    1. Carlo Carraro, 2014. "International environmental cooperation," Chapters,in: Handbook of Sustainable Development, chapter 26, pages 418-431 Edward Elgar Publishing.
    2. Tiziano Distefano & Simone D'Alessandro, 2017. "An Evolutionary approach to International Environmental Agreements," SEEDS Working Papers 0517, SEEDS, Sustainability Environmental Economics and Dynamics Studies, revised Sep 2017.

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