A dynamic climate negotiation game achieving full cooperation

Akira Okada

Journal of Economic Behavior & Organization, 2023, vol. 214, issue C, 657-669

Abstract: We present a repeated participation game where countries form a coalition for international environmental agreements over infinitely many periods. Countries may leave and re-enter coalitions. Payoff transfers are possible. In contrast to the literature on stable coalitions in a static model, we show that there exists a state-dependent subgame perfect equilibrium where the grand coalition forms in every period if countries are sufficiently patient. The grand coalition forms under countries' self-fulfilling belief that small coalitions will dissolve or enlarge to the grand coalition with an unfavorable transfer to non-participants. We further show that if coalitions are irreversible, the grand coalition gradually forms in finitely many periods in every Markov perfect equilibrium. The results are independent of a particular solution for the bargaining problem of coalition benefits.

Keywords: Climate negotiation; Cooperation; Dynamic game; International agreement; Stable coalition (search for similar items in EconPapers)
JEL-codes: C72 H41 Q54 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:214:y:2023:i:c:p:657-669

DOI: 10.1016/j.jebo.2023.08.019

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