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Participation and duration of environmental agreements

Author: Marco Battaglini; Bård Harstad; National Bureau of Economic Research.
Publisher: Cambridge, Mass. : National Bureau of Economic Research, ©2012.
Series: Working paper series (National Bureau of Economic Research), no. 18585.
Edition/Format:   eBook : Document : EnglishView all editions and formats
Summary:
We analyze participation in international environmental agreements (IEAs) in a dynamic game where countries pollute and invest in green technologies. If complete contracts are feasible, participants eliminate the hold-up problem associated with their investments; however, most countries prefer to free-ride rather than participate. If investments are non-contractible, countries face a hold-up problem every time they  Read more...
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Details

Material Type: Document, Internet resource
Document Type: Internet Resource, Computer File
All Authors / Contributors: Marco Battaglini; Bård Harstad; National Bureau of Economic Research.
OCLC Number: 820730232
Notes: Title from http://www.nber.org/papers/18585 viewed December 10, 2012.
"December 2012."
Description: 1 online resource (39 pages) : illustrations.
Series Title: Working paper series (National Bureau of Economic Research), no. 18585.
Responsibility: Marco Battaglini, Bård Harstad.

Abstract:

We analyze participation in international environmental agreements (IEAs) in a dynamic game where countries pollute and invest in green technologies. If complete contracts are feasible, participants eliminate the hold-up problem associated with their investments; however, most countries prefer to free-ride rather than participate. If investments are non-contractible, countries face a hold-up problem every time they negotiate; but the free-rider problem can be mitigated and significant participation is feasible. Participation becomes attractive because only large coalitions commit to long-term agreements that circumvent the hold-up problem. Under well-specified conditions even the first-best outcome is possible when the contract is incomplete. Since real-world IEAs fit in the incomplete contracting environment, our theory may help explaining the rising importance of IEAs and how they should be designed.

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