How Social Preferences Influence the Stability of a Climate Coalition

Lin, Yu-Hsuan (2018): How Social Preferences Influence the Stability of a Climate Coalition.

Abstract

This study examines the impact of social preferences on the individual incentives of participating in climate coalitions with laboratory experimental evidences. The theoretical result suggests that, when a player was inequality-neutral, a dominant strategy equilibrium could exist. However, individuals with social preference may lead a vacillated coalition formation. Joining or not joining depend on the player was critical or non-critical to an effective coalition respectively. The laboratory experimental result shows that players were inequality-averse and the coalition was usually larger than the equilibrium size but unstable. The inequality-averse attitudes have significantly positive impact on the incentives of participation. Particularly, when they are non-critical players, egalitarians are likely to give up the free riding benefit by joining a coalition. Our findings help to understand the climate coalition formation.

• Item Type: MPRA Paper
• Language: English
• Keywords: international environmental agreements; social preference; inequality-aversion; experimental design; climate coalition
• Subjects: C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C91 - Laboratory, Individual Behavior; D - Microeconomics > D6 - Welfare Economics > D63 - Equity, Justice, Inequality, and Other Normative Criteria and Measurement; D - Microeconomics > D7 - Analysis of Collective Decision-Making > D71 - Social Choice ; Clubs ; Committees ; Associations; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q54 - Climate ; Natural Disasters and Their Management ; Global Warming; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q58 - Government Policy

References

1. Barrett, S., Self-enforcing international environmental agreements. Oxford Economic Papers, 1994: p. 878-894.

2. Bahn, O., et al., Stability of international environmental agreements: an illustration with asymmetrical countries. International Transactions in Operational Research, 2009. 16(3): p. 307-324.

3. Barrett, S., International cooperation for sale. European Economic Review, 2001. 45(10): p. 1835-1850.

4. Bratberg, E., S. Tjøtta, and T. Øines, Do voluntary international environmental agreements work? Journal of Environmental Economics and Management, 2005. 50(3): p. 583-597.

5. Eyckmans, J. and M. Finus, New roads to international environmental agreements: the case of global warming. Environmental Economics and Policy Studies, 2006. 7(4): p. 391-414.

6. Grüning, C. and W. Peters, Can justice and fairness enlarge international environmental agreements? Games, 2010. 1(2): p. 137-158.

7. Burger, N.E. and C.D. Kolstad, International Environmental Agreements: Theory Meets Experimental Evidence 1. 2010.

8. Kosfeld, M., A. Okada, and A. Riedl, Institution formation in public goods games. 2006.

9. McEvoy, D.M., et al., International environmental agreements with endogenous minimum participation and the role of inequality. Toward a New Climate Agreement: Conflict, Resolution and Governance, Routledge, 2014: p. 93-105.

10. Willinger, M. and A. Ziegelmeyer, Strength of the social dilemma in a public goods experiment: an exploration of the error hypothesis. Experimental Economics, 2001. 4(2): p. 131-144.

11. Breton, M., L. Sbragia, and G. Zaccour, A dynamic model for international environmental agreements. Environmental and Resource Economics, 2010. 45(1): p. 25-48.

12. Lange, A., The impact of equity-preferences on the stability of international environmental agreements. Environmental and Resource Economics, 2006. 34(2): p. 247-267.

13. Charness, G. and M. Rabin, Understanding social preferences with simple tests. The Quarterly Journal of Economics, 2002. 117(3): p. 817-869.

14. Dannenberg, A., et al., On the provision of public goods with probabilistic and ambiguous thresholds. Environmental and Resource Economics, 2015. 61(3): p. 365-383.

15. Alló, M. and M.L. Loureiro, The role of social norms on preferences towards climate change policies: A meta-analysis. Energy Policy, 2014. 73: p. 563-574.

16. Domínguez Arcos, F., X. Labandeira Villot, and M. Loureiro García, Climate Change Policies And Social Preferences In Galicia And Spain. Revista Galega de Economía, 2011. 20(1).

17. Hanemann, M., X. Labandeira, and M.L. Loureiro, Climate change, energy and social preferences on policies: exploratory evidence for Spain. Climate Research, 2011. 48(2/3): p. 343-348.

18. Svenningsen, L.S. and B.J. Thorsen, Preferences for distributional impacts of climate policy. 2017, University of Copenhagen, Department of Food and Resource Economics.

19. Svenningsen, L.S., Distributive outcomes matter: Measuring social preferences for climate policy. 2017, University of Copenhagen, Department of Food and Resource Economics.

20. Kolstad, C.D., International environmental agreements among heterogeneous countries with social preferences. 2014, National Bureau of Economic Research.

21. d'Aspremont, C., et al., On the stability of collusive price leadership. Canadian Journal of economics, 1983: p. 17-25.

22. Fehr, E. and K.M. Schmidt, A theory of fairness, competition, and cooperation. The quarterly journal of economics, 1999. 114(3): p. 817-868.

23. Fischbacher, U., z-Tree: Zutich Toolbox for Ready-made Economic Experiments, in Experimental Economics. 2007. p. 171-178.

24. Greiner, B., The Online Recruitment System ORSEE 2.0 - A Guide for the Organization of Experiments in Economics. 2004.

25. Dannenberg, A., et al., Inequality aversion and the house money effect. Experimental Economics, 2012. 15(3): p. 460-484.

26. Yang, Y., S. Onderstal, and A. Schram, Inequity aversion revisited. Journal of Economic Psychology, 2016. 54: p. 1-16.

27. Blanco, M., D. Engelmann, and H.T. Normann, A within-subject analysis of other-regarding preferences. Games and Economic Behavior, 2011. 72(2): p. 321-338.

28. Yang, Y., S. Onderstal, and A. Schram. Inequity Aversion Revisited. in Discussion Paper. 2012.

29. Carlsson, F., D. Daruvala, and O. Johansson‐Stenman, Are People Inequality‐Averse, or Just Risk‐Averse? Economica, 2005. 72(287): p. 375-396.

30. Kroll, Y. and L. Davidovitz, Inequality aversion versus risk aversion. Economica, 2003. 70(277): p. 19-29.