Luring Others into Climate Action: Coalition Formation Games with Threshold and Spillover Effects

Valentina Bosetti, Mélanie Heugues and Alessandro Tavoni ()

No 2015.21, Working Papers from Fondazione Eni Enrico Mattei

Abstract: We study the effect of leadership in an experimental threshold public ‘bad’ game, where we manipulate both the relative returns of two investments (the more productive of which causes a negative externality) and the extent to which the gains from leadership diffuse to the group. The game tradeoffs mimic those faced by countries choosing to what degree and when to transition from incumbent polluting technologies to cleaner alternatives, with the overall commitment dictating whether they manage to avert dangerous environmental thresholds. Leading countries, by agreeing on a shared effort, may be pivotal in triggering emission reductions in non-signatories countries. In addition, the leaders’ coalition might also work as innovation and technology adoption catalyzer, thus producing a public good (knowledge) that benefits all countries. In our game, players can choose to tie their hands to a cooperative strategy by signing up to a coalition of first movers. The game is setup such that as long as the leading group reaches a pivotal size, its early investment in the externality-free project may catalyze cooperation by non-signatories. We find that the likelihood of reaching the pivotal size is higher when the benefits of early cooperation are completely appropriated by the coalition members, less so when these benefits spillover to the non-signatories. On the other hand, spillovers have the potential to entice second movers into adopting the ‘clean’ technology.

Keywords: Climate Change; International Cooperation; R&D Spillovers; Threshold Public Goods Game; Coalition Formation Game; Climate Experiment (search for similar items in EconPapers)
JEL-codes: Q5 Q58 (search for similar items in EconPapers)
Date: 2015-03
New Economics Papers: this item is included in nep-cdm, nep-ene, nep-env, nep-exp and nep-res
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Luring others into climate action: coalition formation games with threshold and spillover effects (2017)
Working Paper: Luring others into climate action: coalition formation games with threshold and spillover effects (2017)
Working Paper: Luring Others into Climate Action: Coalition Formation Games with Threshold and Spillover Effects (2015)
Working Paper: Luring others into climate action: Coalition formation games with threshold and spillover effects (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:fem:femwpa:2015.21

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