Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/185494
Authors: 
Harstad, Bård
Year of Publication: 
2018
Series/Report no.: 
CESifo Working Paper 7296
Abstract: 
Real-world negotiations differ fundamentally from existing bargaining theory. Inspired by the Paris Agreement on climate change, this paper develops a novel bargaining game in which each party quanti.es its own contribution (to a public good, for example), before the set of pledges must be accepted. I first show that, if the tolerance for delay is uncertain, each equilibrium pledge coincides with an asymmetric Nash bargaining solution. The weights placed on others. payouts reflect the underlying uncertainty, but they vary from pledge to pledge, so the set of equilibrium pledges is inefficient. This bargaining outcome is embedded in a dynamic contribution game, with endogenous technology, participation, enforcement, and contract terms, to investigate when pledge-and-review bargaining is desirable. The model’s predictions can rationalize the key differences between the climate agreements signed in Kyoto (1997) and Paris (2015) as well as the development from the former to the latter.
Subjects: 
dynamic games
bargaining games
Nash program
climate change
Paris Agreement
Kyoto Protocol
Document Type: 
Working Paper

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