A Mechanism for Addressing Participation and Compliance for the Provision of Global Public Goods

Michael Finus, Ulrike Kornek and Ottmar Edenhofer

No 21990, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: In a three-stage global public good coalition formation game, Kornek and Edenhofer (2020) propose a transfer scheme in the spirit of mechanism design which allows to stabilize large coalitions, including the grand coalition. The transfer scheme addresses the free-rider problem in terms of participation. In order to address the free-rider problem in terms of compliance with transfer obligations, they propose a deposit-refund scheme in the spirit of Gerber and Wichardt (2009) and others. However, McEvoy and McGinty (2023) argue in a comment that the compliance issue has not yet been solved because signatories would have neither an incentive to pay the deposit nor the transfer. In this paper, we show how to modify the original proposal in KE (2020) to render compliance an equilibrium choice. We also demonstrate that the transfer scheme retains its desirable properties when considering asymmetric countries. It emerges that it is promising to generalize further the setting of Kornek and Edenhofer (2020).

Keywords: Agreements; Compliance (search for similar items in EconPapers)
JEL-codes: C71 C72 D70 H41 Q54 (search for similar items in EconPapers)
Date: 2026-09
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