Abstract
We modify a canonical participation game used to study International Environmental Agreements (IEA), considering both mixed and pure strategies at the participation stage, and including a prior cost-reducing investment stage. The use of mixed strategies at the participation stage reverses a familiar result and also reverses the policy implication of that result: with mixed strategies, equilibrium participation and welfare are higher in equilibria that involve higher investment.
Original language | English |
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Pages (from-to) | 685-697 |
Number of pages | 13 |
Journal | Journal of Public Economics |
Volume | 96 |
Issue number | 9-10 |
DOIs | |
Publication status | Published - 1 Oct 2012 |
Externally published | Yes |
Funding
We thank Michael Finus, Matthieu Glachant, Teddy Kim, Danyang Xie, participants of 4th WCERE, 2010 EAERE-FEEM-VIU Summer School, and seminars in HKUST, National University of Singapore, and Nanyang Technological University, the editor of this Journal, and two anonymous referees for helpful comments. Larry Karp thanks the Ragnar Frisch Centre for Economic Research for financial support. Fuhai Hong thanks the support provided by Shanghai Leading Academic Discipline Project (Project Number: B801).
Keywords
- Climate agreement Participation game
- International Environmental Agreement
- Investment
- Mixed strategy