Global Public Good Agreements with Fixed Costs

Michael Finus () and Francesco Furini ()
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Michael Finus: University of Graz, Austria
Francesco Furini: University of Hamburg, Germany

No 2024-18, Graz Economics Papers from University of Graz, Department of Economics

Abstract: We analyze a two-stage coalition formation game in which the provision of the global public good is not only associated with variable costs but also with fixed costs. We consider the assumptions that signatories share or do not share fixed costs. We show that fixed costs may imply corner solutions for equilibrium public good provision levels and generate several different coalition formation scenarios. Some scenarios are a game changer in that stable agreements and global welfare gains from cooperation are large. That is, the well-known conclusion about the “paradox of cooperation†may break down in the light of fixed costs.

Keywords: Global Public Good Provision; International Treaties; Coalition Stability; Fixed Costs. (search for similar items in EconPapers)
JEL-codes: C72 D62 H41 H87 Q50 (search for similar items in EconPapers)
Date: 2024-11
New Economics Papers: this item is included in nep-cdm and nep-gth
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