Coalition-Proof Overlapping International Green R&D Agreements
49 Pages Posted: 6 Oct 2013
Date Written: October 4, 2013
We examine the formation of hub-and-spoke and multilateral green technology international agreements. Green R&D provision produces two types of positive externalities, a global public good (i.e., reduction of carbon dioxide emissions) and spillovers in technology agreements. We utilize the coalition-proof concept to refine the set of Nash equilibria and identify stable coalitional structures. Multilateral and hub-and-spoke coalitional structures can be stable in the absence of income transfers, depending on the agreements’ attrition costs. Fully participated multilateral coalitional structure is not stable in the presence of income transfers; however, isolated bilateral and hub-and-spoke agreements are stable for sufficiently low attrition costs.
Keywords: coalition-proof equilibrium, overlapping coalitions, green technology, hub-and-spoke, international environmental agreements
JEL Classification: C72, D62, D78, H41, H77
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