Negotiating Upstream-Downstream Environmental Agreements

Noemí Navarro () and Jean-Christophe Péreau
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Noemí Navarro: CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique, UR - Université de Rennes
Jean-Christophe Péreau: BSE - Bordeaux sciences économiques - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: We consider the outcomes of two versions of the "Bargain with your neighbors" protocol for two upstream-downstream games: the Seawall game (Delille and Pereau [2014]) and the Great Lakes game (Becker and Easter [1999]). In such a protocol, bilateral bargaining takes place with the players that are located immediately upstream or downstream (neighbors). While in the first version players bargain over actions and transfers simultaneously, in the second version players commit to an action if the subsequent negotiation over transfers is successful. We obtain different outcomes depending on the players' beliefs about what happens when there is disagreement at one bargaining. The socially optimal outcome is obtained when players pre-commit actions and bargain over transfers in the case where one disagreement implies global disagreement. This implies that the institutional rule of the Great Lakes granting veto power to all its members is a necessary condition to reach socially optimal outcomes.

Keywords: Nash-in-Nash bargaining; Passive and symmetric beliefs; Coase theorem; Externalities; Great lakes game; Seawall game; Négociation; Croyances passive et symétriques; Théorème de Coase; Externalités; Jeu des Grands Lacs; Jeu de la digue (search for similar items in EconPapers)
Date: 2026-07-01
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Published in Revue d'économie politique, 2026, 136 (3), pp.351-377. ⟨10.3917/redp.363.0101⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05746311

DOI: 10.3917/redp.363.0101

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