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Keeping Negotiations in the Dark: Environmental Agreements under Incomplete Information

Author

Listed:
  • Ana Espinola-Arredondo
  • Felix Munoz-Garcia

    (School of Economic Sciences, Washington State University)

Abstract

This paper investigates the role of uncertainty as a tool to support cooperation in international environmental agreements. We consider two layers of uncertainty. Under unilateral uncertainty treaties become successful with positive probability in the signaling game, even under parameter conditions for which no agreement is reached under complete information. Under bilateral uncertainty, a separating equilibrium emerges where the leader participates in the treaty only when its environmental concerns are high. We show that the agreement is signed for larger sets of parameter values under unilateral uncertainty. We then show that further layers of uncertainty might enhance social welfare.

Suggested Citation

  • Ana Espinola-Arredondo & Felix Munoz-Garcia, 2010. "Keeping Negotiations in the Dark: Environmental Agreements under Incomplete Information," Working Papers 2010-20, School of Economic Sciences, Washington State University.
    • Handle: RePEc:wsu:wpaper:espinola-7
    as

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    File URL: http://faculty.ses.wsu.edu/WorkingPapers/AnaEspinola/WP2010-20.pdf
    File Function: First version, 2010
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    References listed on IDEAS

    as
    1. Ana Espinola-Arredondo & Felix Munoz-Garcia, 2009. "Free-riding in International Environmental Agreements: A Signaling Approach to Non-Enforceable Treaties," Working Papers 2009-08, School of Economic Sciences, Washington State University.
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    Cited by:

    1. Michael Jakob & Kai Lessmann, 2012. "Signaling in international environmental agreements: the case of early and delayed action," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 12(4), pages 309-325, November.
    2. Aurélie Slechten, 2020. "Environmental Agreements under Asymmetric Information," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 7(3), pages 455-481.
    3. Gregor Schwerhoff & Ulrike Kornek & Kai Lessmann & Michael Pahle, 2018. "Leadership In Climate Change Mitigation: Consequences And Incentives," Journal of Economic Surveys, Wiley Blackwell, vol. 32(2), pages 491-517, April.

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    More about this item

    Keywords

    Signaling games; Unilaterial uncertainty; Bilateral uncertainty; Non-binding negotiations;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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