Keeping Negotiations in the Dark: Environmental Agreements under Incomplete Information

Ana Espinola-Arredondo and Felix Munoz-Garcia

No 2010-20, Working Papers from School of Economic Sciences, Washington State University

Abstract: This paper investigates the role of uncertainty as a tool to support cooperation in international environmental agreements. We consider two layers of uncertainty. Under unilateral uncertainty treaties become successful with positive probability in the signaling game, even under parameter conditions for which no agreement is reached under complete information. Under bilateral uncertainty, a separating equilibrium emerges where the leader participates in the treaty only when its environmental concerns are high. We show that the agreement is signed for larger sets of parameter values under unilateral uncertainty. We then show that further layers of uncertainty might enhance social welfare.

Keywords: Signaling games; Unilaterial uncertainty; Bilateral uncertainty; Non-binding negotiations (search for similar items in EconPapers)
JEL-codes: C72 D62 Q28 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2010-12
New Economics Papers: this item is included in nep-cta, nep-env, nep-gth and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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