Global public goods and unilateral matching mechanisms

While conventional agreements on international public goods require bilateral or multilateral cooperation, we show that unilateral action through matching mechanisms with a self‐commitment device can possibly generate Pareto‐improving outcomes. Even without commitment, unilateral matching may also benefit both players at corner situations. We further characterize the conditions under which this desirable outcome is achieved, particularly highlighting the role of the income distribution and its interplay with the preferences. Moreover, we propose a variant of unilateral matching that can generate Pareto‐improving outcomes regardless of the preferences and the income distribution, indicating that income inequality may not be an obstacle for improving public good provision through unilateral matching.     

A Public Choice Approach to Strategic and Nonstrategic Environmental Policy

In this paper we take a public choice perspective on strategic environmental policy and international environmental agreements. We examine cooperative and noncooperative environmental policies under governments that are either welfare maximizers (“good dictators”) or tax revenue maximizers (“Leviathans”). We show that Leviathans can perform better in terms of welfare and that good dictators can set higher taxes. We then analyze international environmental agreements and show that the breakdown of environmental cooperation can indeed lead to a welfare gain for all signatory countries. Considering a delegation game between governments, we find that a Pareto‐superior Leviathan outcome can be the unique Nash equilibrium.     

Coalition Stability in Public Goods Provision: Testing an Optimal Allocation Rule

We test the canonical model of international environmental agreements (IEAs) in a laboratory setting with asymmetric agents. IEA participation represents coalition formation and public good provision where there are gains to cooperation, but an incentive to free-ride. We test four competing methods of dividing the coalition’s worth: a recently proposed optimal rule which accounts for subjects’ payoffs as a single free-rider, the Shapley value, the Nash bargaining solution, and an equal split. Each treatment generates the theoretically predicted coalition size more often than not. The shares of the potential gains to cooperation achieved by each rule are: 51, 36, 40 and 13%, respectively. These results highlight the importance of using an optimal rule to improve IEAs, and more broadly for voluntary public good provision.     

Do binding agreements solve the social dilemma?

We investigate experimentally whether “binding agreements” can provide a solution to the social dilemma that arises in the presence of pure public goods. Signing a binding agreement can prevent players from free riding on the contributions to the public good. However, a well known theoretical result is that the outcome of the endogenous formation of agreements is not necessarily efficient. Our setting is a bargaining game in which agreements form sequentially. The individual level of contribution to the public good increases with the size of the coalition reaching an agreement and the global agreement is always the socially optimal structure. There are two equilibrium outcomes, the global agreement and an asymmetric structure, which consists of two coalitions of different sizes, the small one free riding on the contributions of the larger one. We run an experiment which lends force to the theoretical result that outcomes may be inefficient. However, subjects do not play Nash and the experimental outcome is, on average, even more inefficient than the theory predicts. Our analysis leads to the conclusion that different types of behaviour co-exist.     

Do South–South preferential trade agreements undermine the prospects for multilateral free trade?

Due to trade diversion, there have been concerns expressed over the proliferation of preferential trade agreements (PTAs) that include South countries. In this paper, we compare welfare across different geographic configurations of bilateral free trade agreements (FTAs) and customs unions (CUs) and examine their implications for the stability of multilateral free trade. While North–North PTAs do tend to yield higher global welfare than South–South PTAs, a single South–South FTA may make free trade more sustainable than any other single agreement. With pre‐existing North–North agreements and a large enough cost asymmetry between regions, an additional South member or a new South–South agreement always makes free trade harder to sustain.     

The impact of peer ratings on cooperation: The role of information and cost of rating

In this study, we experimentally analyze the effectiveness of payoff‐irrelevant peer‐to‐peer ratings as a cooperation enforcement device in a finitely repeated public goods game setting. We run two treatments that differ in the amount of information on own and others' received rating points provided to the players, whereas, in a third treatment, we analyze peer approval when assigning ratings to others is costly. In particular, we wonder whether, even under anonymity and in the absence of reputational concerns, (a) players rate others' contribution decisions in the expected direction and (b) the peer rating mechanisms under study foster cooperation and welfare. Our findings reveal that, in the two costless rating treatments, peer rating concerns lead to higher contributions and efficiency, compared to our control. Introducing a small fixed cost for assigning rating points results in a very high percentage of subjects deciding not to rate others' behavior, so that cooperation cannot be enforced.     

Endogenous Move Structure and Voluntary Provision of Public Goods: Theory and Experiment

In this paper, we examine voluntary contributions to a public good, embedding Varian's (1994) voluntary contribution game in extended games that allow players to choose the timing of their contributions. We show that predicted outcomes are sensitive to the structure of the extended game, and also to the extent to which players care about payoff inequalities. We then report a laboratory experiment based on these extended games. We find that behavior is similar in the two extended games: subjects avoid the detrimental move order of Varian's model, where a person with a high value of the public good commits to a low contribution, and instead players tend to delay contributions. These results suggest that commitment opportunities may be less damaging to public good provision than previously thought.     

Participation constraints of matching mechanisms

Matching mechanisms have been proposed to improve public good provision in voluntary contributions. However, such decentralized subsidizing mechanisms may not be Pareto‐improving and may suffer from incomplete information and incredible commitment. This paper examines participation constraints of matching mechanisms with small matching rates in two cases of equilibria. At interior equilibria, there always exist small Pareto‐improving matching schemes regardless of preferences. This universal existence is useful for cooperation among heterogeneous players in the context without global information of preferences or at the international level without central governments. At corner equilibria, matching schemes work in different ways and have distinct welfare effects in certain cases, and the existence of Pareto‐improving matching schemes is not universal but is possible under certain conditions. The paper further characterizes Pareto‐improving matching schemes, and shows that it is easier to reach Pareto‐improving matching outcomes if players value more on public goods and have stronger substitution between private and public goods.     

Bargaining foundation for ratio equilibrium in public‐good economies

We provide a bargaining foundation for the concept of ratio equilibrium in public‐good economies. We define a bargaining game of alternating offers, in which players bargain to determine their cost shares of public‐good production and a level of public good. We study the stationary subgame perfect equilibrium (SSPE) without delay of the bargaining game. We demonstrate that when the players are perfectly patient, they are indifferent between the equilibrium offers of all players. We also show that every SSPE without delay in which the ratios offered by all players are the same leads to a ratio equilibrium. In addition, we demonstrate that all equilibrium ratios are offered by the players at some SSPE without delay. We use these results to discuss the case when the assumption of perfectly patient players is relaxed and the cost of delay vanishes.     

Forming and Dissolving Partnerships in Cooperative Game Situations

A group of players in a cooperative game are partners (e.g., as in the form of a union or a joint ownership) if the prospects for cooperation are restricted such that cooperation with players outside the partnership requires the accept of all the partners. The formation of such partnerships through binding agreements may change the game implying that players could have incentives to manipulate a game by forming or dissolving partnerships. The present paper seeks to explore the existence of allocation rules that are immune to this type of manipulation. An allocation rule that distributes the worth of the grand coalition among players is called partnership formation‐proof if it ensures that it is never jointly profitable for any group of players to form a partnership and partnership dissolution‐proof if no group can ever profit from dissolving a partnership. The paper provides results on the existence of such allocation rules for general classes of games as well as more specific results concerning well‐known allocation rules.     

Free riders and the optimal prize in public‐good funding lotteries

We prove the existence and uniqueness of an equilibrium in a game where players, whose preferences exhibit constant absolute risk aversion or constant relative risk aversion, contribute to a public good via lottery‐ticket purchases. Contrasting models with risk neutrality, we show that an equilibrium with a strictly positive amount of the public good may not exist without a sufficient number of participants who are not too risk‐averse. We show that players who are more risk‐averse purchase fewer lottery tickets and are more likely to free ride in equilibrium. In fact, it is possible for free riders to place a larger value on the public good than do those who contribute. In a symmetric equilibrium, we show that an upper bound exists for the amount of the public good, even though there are infinitely many participants. Furthermore, we derive a lottery prize that maximizes the amount of the public good in a symmetric equilibrium and find that such a prize always results in an overprovision of the public good.     

Round‐Robin Tournaments with a Dominant Player

We analyze the subgame perfect equilibrium of the round‐robin tournament with one strong (dominant) and two weak players, and we compare this tournament and the one‐stage contest with respect to the players' expected payoffs, expected total effort, and their probabilities of winning. We find that if the contest designer's goal is to maximize the players' expected total effort, then – if the asymmetry between the players is relatively low – the one‐stage contest should be used. However, if the asymmetry is relatively high, then the round‐robin tournament should be used.     

The role of social and technical excludability for the success of impure public good and common pool agreements: The case of international fisheries

We argue that international fisheries are a prime example to study the incentive structure of forming impure public good and common pool agreements. We consider a fully integrated multiple zone model, in which zones are linked through density-dependent migration. The incentive to accede to Regional Fishery Management Organizations (RFMOs) is related to multiple characteristics. Firstly, the relative patch sizes of the high seas, which is the internationally (publicly) accessible domain, compared to exclusive economic zones, which are state-owned (privately owned). This can be related to the degree of socially constructed excludability. Secondly, the intensity of fish migration between various zones, which can be related to the degree of technical excludability. Thirdly, the growth rate of the resource, which can be interpreted as the degree of rivalry, with a low (high) degree of rivalry approximating public good (common pool) features. We show that, generally, excludability reduces free-riding incentives but also the need for cooperation, a variant of the “paradox of cooperation”. Moreover, we show that the benefit-cost duality between public goods and common pool resources generally holds except for some extreme parameter values for which a low degree of rivalry fosters the success of cooperation. Finally, through a variation of the diffusion matrix, we can also analyze a closed as well as a sink-source system.     

Uniform Versus Discriminatory Tariffs

We analyze the non‐cooperative interaction between two exporting countries producing differentiated products and one importing country when governments use optimal policies to maximize welfare. The analysis includes product differentiation, asymmetric costs, and Bertrand competition. For identical exporting countries we demonstrate that the importing country always prefers a uniform tariff regime while both exporting countries prefer a discriminatory tariff regime for any degree of product differentiation. If countries are asymmetric in terms of production cost then the higher‐cost exporter always prefers the discriminatory regime but the lower‐cost exporter prefers the uniform regime if there is a significant cost differential. With cost asymmetry the announcement of a uniform tariff regime by the importer is not a credible strategy since there is an incentive to deviate to discrimination. This implies an international body can play a role in ensuring that tariff agreements are respected.     

PREFERENTIAL TRADE AGREEMENTS AND MULTILATERAL TARIFF COOPERATION*

Are preferential trade agreements (PTAs) building or stumbling blocks for multilateral trade liberalization? I address this question in an infinitely repeated tariff game between three countries engaged in intraindustry trade under oligopoly. The central result is that when countries are symmetric, a free trade agreement (FTA) undermines multilateral tariff cooperation by adversely affecting the cooperation incentive of the nonmember whereas a customs union (CU) does so via its effect on the cooperation incentives of members. However, when countries are asymmetric with respect to either market size or cost, there exist circumstances where PTAs facilitate multilateral tariff cooperation.     

Coordination and the Provision of Discrete Public Goods by Correlated Equilibria

The strategic analysis of the private provision of a discrete public good has shown the existence of multiple Nash equilibria with the efficient number of players voluntarily contributing. However the coordination issue is left unexplained by this literature. The experimental evidence shows that communication among players is helpful in achieving cooperation. We claim that, from the theoretical point of view, this is equivalent to playing correlated equilibria in an extended public good game with communication, modeled as Chicken. We characterize such equilibria as feasible coordination mechanisms to achieve public goods provision in the general contribution game. We further introduce a second kind of game characterized by payoff externalities that may persist after the minimal threshold of contributors is achieved. While it is easy to show the existence of Pareto efficient correlated equilibria in the first game, in the second one players face incentive problems such that a first best cannot always be an equilibrium. Nevertheless there exist correlated equilibria that can qualify as incentive efficient mechanisms, once free riding is seen as a moral hazard issue. Finally, with an example, we discuss the impact of coalition formation in our framework.     

Bargaining by Limiting Cooperation: Withholding Consent for the Level of a Public Good

This paper analyzes how the ability to limit cooperation influences the outcome of complete information bargaining between two players. When cooperation involves prompt resolution of a conflict, as in alternating-offer games and wars-of-attrition, the solutions equate the marginal rates of substitution between earlier resolution and more private goods. When cooperation involves consent for the level of a public good, the outcome again equates the marginal rates of substitution between greater cooperation (more public good) and more private goods (lower cost shares). Here, the equilibrium consists of balanced linear cost shares given by the ratio of marginal-willingness-to-pay to marginal cost.     

Delays and partial agreements in multi-issue bargaining

We model a situation in which two players bargain over two pies, one of which can only be consumed starting at a future date. Suppose the players value the pies asymmetrically: one player values the existing pie more than the future one, while the other player has the opposite valuation. We show that players may consume only a fraction of the existing pie in the first period, and then consume the remainder of it, along with the second pie, at the date at which the second pie becomes available. Thus, our model features a special form of bargaining delay, in which agreements take place in multiple stages. Such partial agreements arise when players are patient enough, when they expect the second pie to become available soon, and when the asymmetry in their valuations is large enough.     

Research cooperation and international standards in a model of coalition stability

Suggestions on international cooperation in climate policy beyond 2012 include substituting or complementing international environmental agreements (IEA) with technology-oriented agreements (TOA). We look at the impact of TOA on environmental cooperation in a framework of coalition stability. Using a numerical model, we analyze the differences of several TOA and how they interact. We find that participation in and environmental effectiveness of the IEA are raised less effectively when the TOA focuses on research cooperation in mitigation technology rather than cooperation on augmenting productivity in the private good sector. This is due to the former having an effect on all actors via emissions, whereas effects of the latter are exclusive to research partners. For the same reason, we find that restricting research cooperation to the coalition is only credible when it focuses on productivity. Technology standards that reduce the emission intensity of production are unlikely to raise participation by themselves and may suffer from inefficiencies. However, these disadvantages do not apply when standards are implemented as a complementary instrument. Separately negotiated technology standards may hence facilitate participation in an IEA without adding to its complexity.     

基于PPP模式的海洋灾害保险合作模式分析

基于我国灾害救助以政府为主、商业性模式开发不足，且海洋灾害风险管理实践发展相对落后的现实，以PPP模式为雏形的灾害保险不失为一种有益的尝试。针对海洋灾害保险存在的信息不对称与主体地位不对等问题，在引入再保险机构、构建新的不对称PPP参与模式基础上，运用灰博弈模型对各主体参与的动态博弈过程及稳定策略进行分析，利用原保险与再保险双维灰博弈矩阵，求得各参数情形下的稳定策略，并对各情形下的稳定策略实现路径进行具体解析，为海洋灾害保险合作模式的达成提供进一步的决策参考