Title

International Environmental Agreements with endogenous or exogenous risk

Document Type

Journal article

Source Publication

Journal of the Association of Environmental and Resource Economists

Publication Date

9-2014

Volume

1

Issue

3

First Page

365

Last Page

394

Publisher

The University of Chicago Press

Keywords

Climate agreement, International Environmental Agreement, Endogenous risk, Exogenous risk, Mixed strategy, Risk aversion

Abstract

AbstractWe examine the effect of endogenous and exogenous risk on the equilibrium (expected) membership of an International Environmental Agreement when countries are risk averse. Endogenous risk arises when countries use mixed rather than pure strategies at the participation game, and exogenous risk arises from the inherent uncertainty about the costs and benefits of increased abatement. Under endogenous risk, an increase in risk aversion increases expected participation. Under exogenous risk and pure strategies, increased risk aversion weakly decreases equilibrium participation if and only if the variance of income decreases with abatement.

DOI

10.1086/677940

Print ISSN

23335955

E-ISSN

23335963

Publisher Statement

Copyright © 2014 by The Association of Environmental and Resource Economists. All rights reserved.

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Recommended Citation

Hong, F., & Karp, L. (2014). International Environmental Agreements with endogenous or exogenous risk. Journal of the Association of Environmental and Resource Economists, 1(3), 365-394. doi: 10.1086/677940