Compliance Technology and Self-Enforcing Agreements

Bard Harstad, Francesco Lancia and Alessia Russo

No 5562, CESifo Working Paper Series from CESifo

Abstract: We analyze a repeated game in which countries are polluting as well as investing in technologies. While folk theorems point out that the first best can be sustained as a subgame-perfect equilibrium when the players are sufficiently patient, we derive the second best equilibrium when they are not. This equilibrium is distorted in that countries over-invest in technologies that are “green” (i.e., strategic substitutes for polluting) but under-invest in adaptation and “brown” technologies (i.e., strategic complements to polluting). It is in particular countries which are small or benefit little from cooperation that will be required to strategically invest in this way. With imperfect monitoring or uncertainty, such strategic investments reduce the need for a long, costly punishment phase and the probability that punishment will be triggered.

Keywords: climate change; environmental agreements; green technology; imperfect monitoring; policy instruments; repeated games; self-enforcing treaties (search for similar items in EconPapers)
JEL-codes: D86 F53 H87 Q54 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Journal Article: Compliance Technology and Self-enforcing Agreements (2019)
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