Regional environmental agreements under incomplete information and political pressure
This paper addresses the issue of environmental agreements under incomplete information at both the national and the international levels, taking into account the fact that firms might exercise political pressure on their country’s government. Domestic firms may have private information about their...
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| Formato: | Objeto de conferencia |
| Lenguaje: | Inglés |
| Publicado: |
1997
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| Acceso en línea: | http://sedici.unlp.edu.ar/handle/10915/169306 |
| Aporte de: |
| Sumario: | This paper addresses the issue of environmental agreements under incomplete information at both the national and the international levels, taking into account the fact that firms might exercise political pressure on their country’s government. Domestic firms may have private information about their cost functions (and might have the ability to influence the government), while countries generally have information unknown to other parties engaged in treaty negotiations. At the domestic level, governments can act as mechanism designers to implement some environmental regulation. However, efficiency cannot be achieved under incomplete information when a system of taxes is not sufficient to separate “cleaner” from “dirtier” firms. Neither can a mechanism be internally efficient when some degree of political pressure is present. But, in both cases, countries can improve over the no domestic policy situation. At the international level, such kinds of “solutions” are not possible due to the absence of a supranational authority to design the corresponding mechanism. Then, some sort of bargaining among countries has to take place. This paper shows that, even in case of incomplete information where the parties involved are not willing to reveal their characteristics, countries can sign environmental agreements which improve efficiency relative to status quo and are respected by everybody in equilibrium no matter what some countries beliefs are about the other countries’ types. The nature of those agreements depends on the fundamentals of each country (consumers’ preferences and firms’ costs), on the pre-existent domestic regulation and the situation to design them (the degree of knowledge of national firms’ costs and their political pressure), and also on the information on the possible types the other parties in the negotiations can be. |
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