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.
Access to external full text or publisher's version may require subscription.
Full-text Version
Publisher’s Version
Language
English
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