Robert Schmidt, University of Hagen

"Climate Coalition Formation In Continuous Time"

Abstract

We introduce a novel climate coalition formation game in continuous time. The model makes the negotiation process during which countries join the coalition explicit. This yields a more realistic description of actual negotiations than previous models, and helps to resolve the so-called "Paradox of International Agreements'' (Kolstad and Toman 2005), according to which climate cooperation cannot deliver substantial welfare gains when countries' participation decisions are voluntary. We argue that this paradox builds on an overly restrictive static framework where all participation decisions have to be taken simultaneously. In our model, countries are free to decide whether and when to join the coalition. This allows for the formation of large coalitions, including the grand coalition, in equilibrium. Using mixed strategies, our model also offers an explanation for delays in climate negotiations, as well as for their possible failure on the equilibrium path.

Contact person: Frikk Nesje