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International Environmental Agreements with mixed strategies and investment

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  • Hong, Fuhai
  • Karp, Larry

Abstract

We modify a canonical participation game used to study International Environmental Agreements (IEA), considering both mixed and pure strategies at the participation stage, and including a prior cost-reducing investment stage. The use of mixed strategies at the participation stage reverses a familiar result and also reverses the policy implication of that result: with mixed strategies, equilibrium participation and welfare are higher in equilibria that involve higher investment.

Suggested Citation

  • Hong, Fuhai & Karp, Larry, 2012. "International Environmental Agreements with mixed strategies and investment," Journal of Public Economics, Elsevier, vol. 96(9-10), pages 685-697.
    • Handle: RePEc:eee:pubeco:v:96:y:2012:i:9:p:685-697
    DOI: 10.1016/j.jpubeco.2012.05.003
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    More about this item

    Keywords

    International Environmental Agreement; Climate agreement; Participation game; Investment; Mixed strategy;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • H4 - Public Economics - - Publicly Provided Goods
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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