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Leading the Way: Coalitional Stability in Technological Cooperation & Sequential Climate Policy

  • Thomas Norman
  • Heinrich H. Nax

The World's nations have yet to reach a truly effective treaty to control the emission of greenhouse gases.� The importance of compatibility with private incentives of individual countries has been acknowledged (at least by game theorists) in designing climate policies for the post-Kyoto world.� Individually incentive-compatible agreements, however, may still be spoilt if coalitional incentives to deviate as a group exist.� As a first step toward understanding these incentives from a game-theoretic perspective, we propose a hybrid noncooperative-cooperative game theory model of coalition formation in technology collaboration.� Serious coalitional instabilities inherent to the existing climate policy architectures are revealed.� It turns out that coalitionally stable agreements are achieved via intermediate self-selecting subcoalitions.� The sequence of coalitions forming and the size of the direct and spillover effects of R&D collaboration on countries' individual production technologies determine the effectiveness of the agreements to reduce carbon emissions.� These coalitional group motives are already becoming important in the practice of climate change negotiations.

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File URL: http://www.economics.ox.ac.uk/materials/papers/5528/paper585.pdf
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Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 585.

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Date of creation: 01 Dec 2011
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Handle: RePEc:oxf:wpaper:585
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  1. Levy, Philip I & Srinivasan, T N, 1996. "Regionalism and the (Dis)advantage of Dispute-Settlement Access," American Economic Review, American Economic Association, vol. 86(2), pages 93-98, May.
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  3. Bard Harstad, 2009. "The Dynamics of Climate Agreements," Discussion Papers 1474, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  4. Bard Harstad, 2012. "Climate Contracts: A Game of Emissions, Investments, Negotiations, and Renegotiations," Review of Economic Studies, Oxford University Press, vol. 79(4), pages 1527-1557.
  5. Juan-Carlos Altamirano-Cabrera & Michael Finus, 2006. "Permit trading and stability of international climate agreements," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 19-48, May.
  6. Bosetti, Valentina & Frankel, Jeffrey A., 2012. "Sustainable Cooperation in Global Climate Policy: Specific Formulas and Emission Targets," Scholarly Articles 8694933, Harvard Kennedy School of Government.
  7. Barrett, Scott, 2005. "The theory of international environmental agreements," Handbook of Environmental Economics, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 3, chapter 28, pages 1457-1516 Elsevier.
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