Why and when coalitions split? An alternative analytical approach with an application to environmental agreements

Raouf Boucekkine (), Carmen Camacho (), Weihua Ruan () and Benteng Zou
Additional contact information
Carmen Camacho: Paris School of Economics and CNRS, France
Weihua Ruan: Purdue University Northwest, USA

No 2022013, LIDAM Discussion Papers IRES from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: We use a parsimonious two-stage differential game setting where the duration of the first stage, the coalition stage, depends on the will of a particular player to leave the coalition through an explicit timing variable. By specializing in a standard linear-quadratic environmental model augmented with a minimal constitutional setting for the coalition (payoff share parameter), we are able to analytically extract several nontrival findings. Three key aspects drive the results: the technological gap as an indicator of heterogeneity across players, the constitution of the coalition and the intensity of the public bad (here, the pollution damage). We provide with a full analytical solution to the two-stage differential game. In particular, we characterize the intermediate parametric cases leading to optimal finite time splitting. A key characteristic of these finite-time-lived coalitions is the requirement of the payoff share accruing to the splitting country to be large enough. Incidentally, our two-stage differential game setting reaches the conclusion that splitting countries are precisely those which use to benefit the most from the coalition. Constraining the payoff share to be low by Constitution may lead to optimal everlasting coalitions only provided initial pollution is high enough, which may cover the emergency cases we are witnessing nowadays.

Keywords: Coalition splitting; environmental agreements; constitutional vs technological heterogeneity; differential games; multistage optimal control (search for similar items in EconPapers)
JEL-codes: C61 C73 D71 (search for similar items in EconPapers)
Date: 2022-05-16
New Economics Papers: this item is included in nep-env and nep-gth
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Working Paper: Why and when coalitions split? An alternative analytical approach with an application to environmental agreements (2022)
Working Paper: Why and when coalitions split? An alternative analytical approach with an application to environmental agreements (2022)
Working Paper: Why and when coalitions split? An alternative analytical approach with an application to environmental agreements (2022)
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