Participation and Duration of Environmental Agreements

Marco Battaglini and Bard Harstad

Journal of Political Economy, 2016, vol. 124, issue 1, 160 - 204

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 problem 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.

Date: 2016
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Working Paper: Participation and Duration of Environmental Agreements (2012)
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