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International Environmental Agreements with Mixed Strategies and Investment

  • Author(s): Hong, Fuhai
  • Karp, Larry
  • et al.
Abstract

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.

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