Subjective Beliefs in International Agreements

Abstract

In this paper, we study the impact of countries’ subjective beliefs, i.e., pessimism and optimism, on international agreements to provide global public goods. Under symmetric beliefs, we find that while pessimism (optimism) could decrease (increase) signatories’ efforts, it can also increase (decrease) the coalition size. Under asymmetric beliefs, optimists entering the coalition may crowd out the more pessimistic countries. If a stable coalition exists, then while optimists are willing to participate even at rather small coalition sizes, the participation of more pessimistic types requires the coalition size to be larger. A stable coalition would consist of the most optimists and possibly some other types.