Risk Aversion and International Environmental Agreements
We introduce uncertainty and risk aversion to the study of international environmental agreements. We consider a simple model with identical agents and linear payoffs. We show that a stable treaty with positive action always exists. While uncertainty lowers the action of signatories, we find that it may increase participation. In addition, uncertainty may generate multiple equilibria. A treaty with low action and low participation may coexist with one with high action and high participation. Overall, and despite risk aversion, the impact of uncertainty on welfare may be positive. A reduction in uncertainty may hurt international cooperation.
|Date of creation:||2007|
|Date of revision:|
|Contact details of provider:|| Postal: CP 8888, succursale Centre-Ville, Montréal, QC H3C 3P8|
Phone: (514) 987-8161
Web page: http://www.cirpee.org/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
- Kolstad, Charles D., 2007. "Systematic uncertainty in self-enforcing international environmental agreements," Journal of Environmental Economics and Management, Elsevier, vol. 53(1), pages 68-79, January.
- Charles Kolstad, 2005. "Piercing the Veil of Uncertainty in Transboundary Pollution Agreements," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 31(1), pages 21-34, 05.
- Gradstein, Mark & Nitzan, Shmuel & Slutsky, Steven, 1992. "The Effect of Uncertainty on Interactive Behaviour," Economic Journal, Royal Economic Society, vol. 102(412), pages 554-61, May.
- Na, Seong-lin & Shin, Hyun Song, 1998. "International Environmental Agreements under Uncertainty," Oxford Economic Papers, Oxford University Press, vol. 50(2), pages 173-85, April.
- Sandler, Todd & Sternbenz, Frederic P., 1990. "Harvest uncertainty and the tragedy of the commons," Journal of Environmental Economics and Management, Elsevier, vol. 18(2), pages 155-167, March.
- Alistair Ulph, 2004. "Stable International Environmental Agreements with a Stock Pollutant, Uncertainty and Learning," Journal of Risk and Uncertainty, Springer, vol. 29(1), pages 53-73, 07.
- Christian Gollier, 2004. "The Economics of Risk and Time," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262572249.
- Barrett, Scott, 1994. "Self-Enforcing International Environmental Agreements," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 878-94, Supplemen.
- Geoffrey Heal & Bengt Kriström, 2002. "Uncertainty and Climate Change," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 22(1), pages 3-39, June.
When requesting a correction, please mention this item's handle: RePEc:lvl:lacicr:0739. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Manuel Paradis)
If references are entirely missing, you can add them using this form.