Department of Agricultural and Resource Economics
International Environmental Agreements with Mixed Strategies and Investment
- Author(s): Hong, Fuhai
- Karp, Larry
- et al.
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 alsoreverses the policy implication of that result: with mixed strategies, equilibriumparticipation and welfare is higher in equilibria that involve higher investment.