A Paradox of Coalition Building in Public Good Provision

Arbeitspapier

This paper considers endogenous coalition formations and endogenous technology choices in a model of private provision of global public goods. We show that the possibility of future interstate (partial) coordination may hinder the current adoption of better technology by a country outside the cooperation, which may exacerbate an existing underprovision problem. In particular, in the subgame perfect equilibrium of a three-stage game, we find two paradoxical results: prohibition of the formation of future partial coalitions encourages the country outside the cooperation to adopt better technology, which could lead to an increase in the total public good supply and an improvement of global welfare. The results have an important policy implication: in the context of the Paris Agreement, for example, a large country announces lower nationally determined contributions by a strategic incentive to adopt lower technology to motivate coalition building by other nations, which in the end may lead to lower aggregate public-good supply and global welfare.

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• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 9354

Classification and Topics

• Classification: Wirtschaft ; Public Goods ; International Agreements and Observance; International Organizations ; Climate; Natural Disasters and Their Management; Global Warming ; Environmental Economics: Technological Innovation
• Subject: coalition formation ; public goods ; endogenous technology ; environmental agreements

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Buchholz, Wolfgang ; Hattori, Keisuke
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2021

Further information

• Handle: http://hdl.handle.net/10419/248899