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Abstract:
We extend the work on coalition formation in global pollution control by allowing for multiple coalitions. Equilibrium coalitions are derived under different "rules of the game" and compared with each other. We consider internal & external equilibria and equilibrium binding agreements in the cartel formation game, coalition-proof and strong Nash equilibria in the open-membership game and in the exclusive membership - and - games, subgame-perfect equilibria in the sequential move unanimity game and equilibria in the equilibrium binding agreement game. We show that farsightedness and exclusive membership leads to more concentrated coalition structure, implying lower global emissions and higher global welfare. Moreover, we evaluate the different coalition formation games with respect to their ability to explain existing international environmental agreements and with respect to their theoretical consistency.

International environmental agreements, coalition formation games, global pollution

Abstract:
This paper compares stability of international environmental agreements for six different rules of coalition formation under very general conditions (any type of heterogeneity between countries). The rules can be interpreted as different institutional settings in which treaty formations take place and/or different designs of agreements. We consider open and restricted open membership game as well as four exclusive membership games with different degrees of unanimity required to form coalitions. From a policy perspective, counterintuitively, it turns out that stability is higher under exclusive than under open membership and stability increases with the degree of unanimity. We discuss the policy implications of our result for future treaty-making.

Non-cooperative game theory, Rules of coalition formation, Stability

Abstract:
We identify the core as an appealing stability concept of cooperative game theory, but argue that the non-cooperative approach has conceptual advantages in the context of economic problems with externalities. Therefore, we derive a non-cooperative foundation of core-stability for positive externality NTU-games. First, in the spirit of Hart/Kurz (1983), we develop a game that we call - game and show that strong Nash equilibria coalition structures in this game are identical to - and - core stable coalition structures. Second, as a by-product of the definition of the - game, we develop an extension called an - game. Finally, we compare equilibria in the - and - game with those in the - and - game of Hart and Kurz (1983).We identify the core as an appealing stability concept of cooperative game theory, but argue that the non-cooperative approach has conceptual advantages in the context of economic problems with externalities.

Core-stability, Non-cooperative Game Theory, Positive Externality Games

Abstract:
We analyze the formation of self-enforcing international environmental agreements under the assumption that countries announce their participation either simultaneously or sequentially. It is shown that a sequential formation process opens up possibilities for strategic behavior of countries that may lead to inferior outcomes in terms of global abatement and welfare. We then analyze whether and under which conditions a regulator like an international organization, even without enforcement power, can improve upon globally suboptimal outcomes through coordination and moderation, given that recommendations must be Pareto-improving to all parties.

International environmental agreements, Timing of participation decision

Abstract:
We provide an existence and a uniqueness result for coalitional equilibria of a game in strategic form. Both results are illustrated for a public good game and a homogeneous Cournot-oligopoly game.

Existence and uniqueness of coalitional equilibrium, Game in strategic form