International Environmental Agreements with mixed strategies and investment
Journal of Public Economics
International Environmental Agreement, Climate agreement Participation game, Investment, Mixed strategy
We modify a canonical participation game used to study International Environmental Agreements (IEA), considering both mixed and pure strategies at the participation stage, and including a prior cost-reducing investment stage. The use of mixed strategies at the participation stage reverses a familiar result and also reverses the policy implication of that result: with mixed strategies, equilibrium participation and welfare are higher in equilibria that involve higher investment.
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Hong, F., & Karp, L. (2014). International Environmental Agreements with mixed strategies and investment. Journal of Public Economics, 96(9-10), 685-697. doi: 10.1016/j.jpubeco.2012.05.003