International environmental agreements between asymmetric countries: A repeated game analysis

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Abstract

This paper introduces a new approach to performing a relaxed analysis using a repeated game to achieve an international environmental agreement (IEA) with the full participation of countries when an asymmetric relationship exists with respect to emissions-related benefits and environmental damage. Our model reveals that a stable IEA depends on the magnitude of the relationship between the benefit-cost ratios of the two types of countries, not on their compositions. That is, the number of punishing countries for a weakly renegotiation-proof equilibrium depends on the benefit-cost ratios of the two types of countries. Our results show that a global cooperation on abatement among the two types of countries can be achieved by addressing deviation through flexibly selecting punishing countries based on benefit-cost ratios.

Original languageEnglish
JournalJapan and the World Economy
DOIs
Publication statusAccepted/In press - Jan 1 2018

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costs
environmental damage
participation
Repeated games
International environmental agreements
Benefit-cost ratio
Game analysis
Renegotiation
Abatement
Environmental damage
Deviation
Participation

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics
  • Political Science and International Relations

Cite this

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title = "International environmental agreements between asymmetric countries: A repeated game analysis",
abstract = "This paper introduces a new approach to performing a relaxed analysis using a repeated game to achieve an international environmental agreement (IEA) with the full participation of countries when an asymmetric relationship exists with respect to emissions-related benefits and environmental damage. Our model reveals that a stable IEA depends on the magnitude of the relationship between the benefit-cost ratios of the two types of countries, not on their compositions. That is, the number of punishing countries for a weakly renegotiation-proof equilibrium depends on the benefit-cost ratios of the two types of countries. Our results show that a global cooperation on abatement among the two types of countries can be achieved by addressing deviation through flexibly selecting punishing countries based on benefit-cost ratios.",
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