Self-Enforcing Environmental Agreements with Optimal Partial Cooperation

27 Pages Posted: 29 Jun 2023 Last revised: 4 Mar 2024

See all articles by Thomas Eichner

Thomas Eichner

FernUniversität in Hagen

Mark Schopf

FernUniversität in Hagen

Abstract

This paper analyzes international environmental agreements in three-stage games consisting of a membership subgame, the signatories’ choice of partial cooperation, and an emissions subgame. Signatories may act as Stackelberg leaders or play Nash. In the Stackelberg game, full cooperation between signatories is optimal. In the Nash game, optimal partial cooperation is less than full cooperation if emissions are strategic substitutes. In this case the subgame perfect equilibrium of the Nash game with optimal partial cooperation is identical to the subgame perfect equilibrium of the Stackelberg game with full cooperation. Finally, we apply our results to coalition formation games of the literature. In the Nash games, the stable coalition is small with full cooperation, whereas the grand coalition can be stable and the efficient allocation can be implemented with optimal partial cooperation.

Keywords: optimal partial cooperation, stable coalition, Nash, Stackelberg

JEL Classification: C71, F55, Q54

Suggested Citation

Eichner, Thomas and Schopf, Mark, Self-Enforcing Environmental Agreements with Optimal Partial Cooperation. Available at SSRN: https://ssrn.com/abstract=4495260 or http://dx.doi.org/10.2139/ssrn.4495260

Thomas Eichner

FernUniversität in Hagen ( email )

Universitätsstrasse 41
Feithstrathe 140
Hagen, 58084
Germany

Mark Schopf (Contact Author)

FernUniversität in Hagen ( email )

Universitätsstrasse 41
Feithstrathe 140
Hagen, 58084
Germany

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