Munich Personal RePEc Archive

Designing International Environmental Agreements under Participation Uncertainty

Mao, Liang (2017): Designing International Environmental Agreements under Participation Uncertainty.

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Abstract

We analyze the design of international environmental agreement (IEA) by a three-stage coalition formation game. In stage one, a designer chooses an IEA rule which, depending on the coalition of signatories formed in stage two, specifies the action that each signatory should take in stage three. A certain degree of participation uncertainty exists in that each country intending to sign the IEA for its best interest has a probability to end up a non-signatory. An IEA rule is said to be optimal if it maximizes the expected payoff of each signatory. We provide an algorithm to determine an optimal rule, and show its advantage over some rules used in the literature.

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