Participation and Duration of Environmental Agreements

Posted: 18 Mar 2017

See all articles by Marco Battaglini

Marco Battaglini

Cornell University

Bård Harstad

University of Oslo - Department of Economics

Date Written: 2016

Abstract

We analyze participation in international environmental agreements in a dynamic game in which countries pollute and invest in green technologies. If complete contracts are feasible, participants eliminate the holdup problem associated with their investments; however, most countries prefer to free ride rather than participate. If investments are noncontractible, countries face a holdup roblem every time they negotiate; but the free-rider problem can be mitigated and significant participation is feasible. Participation becomes attractive because only large coalitions commit to long-term agreements that circumvent the holdup problem. Under well-specified conditions even the first-best outcome is possible when the contract is incomplete.

Suggested Citation

Battaglini, Marco and Harstad, Bard, Participation and Duration of Environmental Agreements (2016). Journal of Political Economy, Vol. 124, No. 1, 2016, Available at SSRN: https://ssrn.com/abstract=2934319

Marco Battaglini

Cornell University ( email )

Ithaca, NY 14853
United States

Bard Harstad (Contact Author)

University of Oslo - Department of Economics ( email )

P.O. Box 1095 Blindern
N-0317 Oslo
Norway

HOME PAGE: http://www.sv.uio.no/econ/english/people/aca/bardh/

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