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International environmental agreements with consistent conjectures

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  • Gelves, Alejandro
  • McGinty, Matthew

Abstract

We introduce consistent conjectures into Barrett (1994) canonical model of international environmental agreements. The existing literature assumes inconsistent Nash conjectures, despite the fact that policymakers recognize that abatement levels are strategic substitutes and increases in abatement generate carbon leakage. With consistent conjectures much of the conventional wisdom is reversed. The non-cooperative abatement level is below the Nash equilibrium. The difference between Nash and consistent conjectures is greatest when benefits are large and costs are small. We find that large coalitions cannot form. However, small coalitions can result in substantial increases in abatement relative to the non-cooperative outcome.

Suggested Citation

  • Gelves, Alejandro & McGinty, Matthew, 2016. "International environmental agreements with consistent conjectures," Journal of Environmental Economics and Management, Elsevier, vol. 78(C), pages 67-84.
    • Handle: RePEc:eee:jeeman:v:78:y:2016:i:c:p:67-84
    DOI: 10.1016/j.jeem.2016.02.005
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    Cited by:

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    3. Chu‐chuan Cheng & Hsun Chu, 2020. "International emissions trading in a political economy," Review of International Economics, Wiley Blackwell, vol. 28(2), pages 429-446, May.
    4. Tibor Besedeš & Erik P. Johnson & Xinping Tian, 2020. "Economic determinants of multilateral environmental agreements," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 27(4), pages 832-864, August.
    5. Baran Doda, Simon Quemin, Luca Taschini, 2017. "A theory of gains from trade in multilaterally linked ETSs," GRI Working Papers 275, Grantham Research Institute on Climate Change and the Environment.
    6. Tiziano Distefano & Simone D'Alessandro, 2017. "An Evolutionary approach to International Environmental Agreements," SEEDS Working Papers 0517, SEEDS, Sustainability Environmental Economics and Dynamics Studies, revised Sep 2017.
    7. Matthew McGinty, 2021. "Rational conjectures and evolutionary beliefs in public goods games," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 23(6), pages 1130-1143, December.
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    More about this item

    Keywords

    International environmental agreements; Consistent conjectures; Coalition formation; Public goods; Externalities;
    All these keywords.

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • F5 - International Economics - - International Relations, National Security, and International Political Economy
    • H4 - Public Economics - - Publicly Provided Goods
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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