publication . Article . Preprint . 2013

International Environmental Agreements with Endogenous or Exogenous Risk

Fuhai HONG; Larry KARP;
Open Access
  • Published: 01 Oct 2013 Journal: Journal of the Association of Environmental and Resource Economists, volume 1, issue 3, pages 365-365
We examine the effect of endogenous and exogenous risk on the equilibrium (expected) membership of an International Environmental Agreement when countries are risk averse. Endogenous risk arises when countries use mixed rather than pure strategies at the participation game, and exogenous risk arises from the inherent uncertainty about the costs and benefits of increased abate- ment. Under endogenous risk, an increase in risk aversion increases expected participation. Under exogenous risk and pure strategies, increased risk aver- sion weakly decreases equilibrium participation if and only if the variance of income decreases with abatement.
free text keywords: International Environmental Agreement, climate agreement, endogenous risk, exogenous risk, risk aversion, mixed strategy., jel:H4, jel:Q54, jel:D8

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publication . Article . Preprint . 2013

International Environmental Agreements with Endogenous or Exogenous Risk

Fuhai HONG; Larry KARP;