International Environmental Agreements with mixed strategies and investment

Hong, Fuhai; Karp, Larry S.

doi:10.1016/j.jpubeco.2012.05.003

Cited by 41 publications

(37 citation statements)

References 46 publications

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“…First, we present the de…nition of coalition stability from d 'Aspremont et al (1983), which has been extensively used in the literature on international environmental agreements. 16 De…nition 1 An agreement consisting of n signatories is stable if T C s j (n) T C f i (n 1) for j = 1; :::; n and T C f i (n) T C s j (n + 1) for i = 1; :::; N n:…”

Section: The Nash Equilibrium Of the Membership Gamementioning

confidence: 99%

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Sharing R&D investments in cleaner technologies to mitigate climate change

Elsayed

Rubio

2014

Resource and Energy Economics

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This paper examines international cooperation on technological development as an alternative to international cooperation on GHG emission reductions. It is assumed that when countries cooperate they coordinate their investments so as to minimize the agreement costs of controlling emissions and that they also pool their R&D e¤orts so as to fully internalize the spillover e¤ects of their investments in R&D. In order to analyze the scope of cooperation, an agreement formation game is solved in three stages. First, countries decide whether or not to sign the agreement. Then, in the second stage, signatories (playing together) and non-signatories (playing individually) select their investment in R&D.Finally, in the third stage, each country decides its level of emissions non-cooperatively.For linear environmental damages and quadratic investment costs, our …ndings show that the maximum participation in a R&D agreement consists of six countries and that participation decreases as the coalition information exchange decreases until that a minimum participation consisting of three countries is reached. We also …nd that the grand coalition is stable if the countries sign an international research joint venture but in this case the e¤ectiveness of the agreement is very low.

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Section: The Nash Equilibrium Of the Membership Gamementioning

confidence: 99%

“…17 If N is lower than 16 We avoid to use the term self-enforcing in the de…nition because as has been pointed out by McEvoy and Stranlund (2009) is a bit misleading. The concept refers to the stability of cooperative agreements, not to enforcing compliance with these agreements once they are signed.…”

Section: The Nash Equilibrium Of the Membership Gamementioning

confidence: 99%

Sharing R&D investments in cleaner technologies to mitigate climate change

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Rubio

2014

Resource and Energy Economics

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“…We show that unless marginal costs are required to be convex, this conjecture is false. Dixit & Olson (2000) and Hong & Karp (2010) study the game when agents use mixed strategies at the participation stage. Ulph (2004), Kolstad (2007), Kolstad & Ulph (2008) and Karp (2012) examine the effect on participation and welfare when agents anticipate learning about costs or damages after the participation stage, before they choose abatement.…”

Section: Introductionmentioning

confidence: 99%

Participation games and international environmental agreements: A non-parametric model

Karp

Simon

2013

Journal of Environmental Economics and Management

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Abstract. We examine the size of stable coalitions in a participation game that has been used to model international environmental agreements, cartel formation, R&D spillovers, and monetary policy. The literature to date has relied on parametric examples; based on these examples, a consensus has emerged that in this kind of game, the equilibrium coalition size is small, except possibly when the potential benefits of cooperation are also small. In this paper, we develop a non-parametric approach to the problem, and demonstrate that the conventional wisdom is not robust. In a general setting, we identify conditions under which the equilibrium coalition size can be large even when potential gains are large. Contrary to previously examined leading special cases, we show that reductions in marginal abatement costs in an international environmental game can increase equilibrium membership, and we provide a measure of the smallest reduction in costs needed to support a coalition of arbitrary size.

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“…Hong and Karp (2012) show that with mixed strategies in the participation game, the small coalition paradox is overcome: equilibrium participation and welfare are higher in equilibria that involve higher investment. Mixed strategies create endogenous risk so that risk aversion increases the equilibrium probability of participation.…”

Section: Introductionmentioning

confidence: 94%

“…The hold-up problem has also been analyzed by Hong and Karp (2012) and Helm and Schmidt (2015) assuming that countries decide on R&D investment non-cooperatively before negotiating an abatement agreement. Hong and Karp (2012) show that with mixed strategies in the participation game, the small coalition paradox is overcome: equilibrium participation and welfare are higher in equilibria that involve higher investment.…”

Section: Introductionmentioning

confidence: 99%

Sharing R&D investments in breakthrough technologies to control climate change

Rubio¹

2017

Oxf. Econ. Pap.

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This paper examines international cooperation on technological development as an alternative to international cooperation on GHG emission reductions. In order to analyze the scope of cooperation, a three-stage technology agreement formation game is solved.First, countries decide whether or not to sign up to the agreement. Then, in the second stage, the signatories (playing together) and the non-signatories (playing individually) select their investment in R&D. In this stage, it is assumed that the signatories not only coordinate their levels of R&D investment but also pool their R&D e¤orts to fully internalize the spillovers of their investment in innovation. Finally, in the third stage, each country decides non-cooperatively upon its level of energy production. Emissions depend on the decisions made regarding investment and production. If a country decides to develop a breakthrough technology in the second stage, its emissions will be zero in the third stage. For linear environmental damages and quadratic investment costs, the grand coalition is stable if marginal damages are large enough to justify the development of a breakthrough technology that eliminates emissions completely, and if technology spillovers are not very important.

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International Environmental Agreements with mixed strategies and investment

Cited by 41 publications

References 46 publications

Sharing R&D investments in cleaner technologies to mitigate climate change

Sharing R&D investments in cleaner technologies to mitigate climate change

Participation games and international environmental agreements: A non-parametric model

Sharing R&D investments in breakthrough technologies to control climate change

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