Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/314702 
Year of Publication: 
2025
Series/Report no.: 
CESifo Working Paper No. 11663
Publisher: 
CESifo GmbH, Munich
Abstract: 
We study experimentally a new model to study the effect of climate externalities and contractual incompleteness on network formation. We model a network where good/green firms enjoy direct and indirect benefits from linking with one another. Bad/brown firms benefit from having a connection with a good firm, but they are a cost to both direct and indirect connections. In efficient networks the green firms should form large connected components with very few brown firms attached. The equilibrium networks, on the other hand, have many more brown firms attached, and components are also smaller than the efficient ones. Our experiments show that empirical results are broadly in line with the theoretical equilibrium predictions, although the precise quantitative outcomes are different from the theory.
Subjects: 
network formation
climate change
contractual externalities
efficiency and equilibrium
JEL: 
C92
D62
D85
Q54
Document Type: 
Working Paper
Appears in Collections:

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.