We analyze participation in international environmental agreements in a dynamic game in which countries pollute and invest in green technologies. If complete contracts are feasible, participants eliminate the holdup problemassociated with their investments; however, most countries prefer to free ride rather than participate. If investments are noncontractible, countries face a holdup problemevery 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 holdup problem. Under well-specified conditions even the first-best outcome is possible when the contract is incomplete.

Participation and duration of environmental agreements

Battaglini, Marco;
2016-01-01

Abstract

We analyze participation in international environmental agreements in a dynamic game in which countries pollute and invest in green technologies. If complete contracts are feasible, participants eliminate the holdup problemassociated with their investments; however, most countries prefer to free ride rather than participate. If investments are noncontractible, countries face a holdup problemevery 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 holdup problem. Under well-specified conditions even the first-best outcome is possible when the contract is incomplete.
2015
Battaglini, Marco; Harstad, Bård
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11565/4051615
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