EC238 Lecture Notes - Lecture 2: Ozone Depletion, Montreal Protocol, Organofluorine Chemistry
Document Summary
Game theory has been used to study participation in agreements with public good problems issue linkage strategy where countries simultaneously negotiate a climate change agreement and another economic agreement on a linked issue, ie. trade. A final strategy involves transfers from gainers to losers or a redistribution of net benefits. Choosing cost-effective policies can positively effect the level of participation. Can be used to study the incentives faced by each nation when the payoff to each nation depends not only on its decision, but also on the decision of other nations. Barrett model describes self-enforcing agreements as those where the incentives are likely to create stable coalitions. In this game, when new countries join the agreement, existing participants respond by abating more. When countries leave the coalition, participants respond by abating less. A stable, successful agreement is most likely to be achieved when the benefits to free riding are low.
