Recently, the paper of SOE Assistant Professor Dr. Fuhai Hong "International Environmental Agreements with Mixed Strategies and Investment" co-authored with Prof. Larry Karp at University of California Berkeley was accepted by Journal of Public Economics for publication.
International Environmental Agreements with Mixed Strategies and Investment
Abstract: We modify a canonical participation game used to study International Environmental Agreements (IEA), considering both mixed and pure strategies at the participation stage, and including a prior cost-reducing investment stage. The use of mixed strategies at the participation stage reverses a familiar result and also reverses the policy implication of that result: with mixed strategies, equilibrium participation and welfare is higher in equilibria that involve higher investment.
JEL classification: C72, H4, Q54
Keywords: International Environmental Agreement, climate agreement, participation game, investment, mixed strategy
