Risk Aversion and International Environmental Agreements

CIRPEE Working Paper No. 07-39

33 Pages Posted: 12 Nov 2007

See all articles by Vincent Boucher

Vincent Boucher

Université Laval

Yann Bramoulle

Université Laval - Département d'Économique

Date Written: November 2007

Abstract

We introduce uncertainty and risk aversion to the study of international environmental agreements. We consider a simple model with identical agents and linear payoffs. We show that a stable treaty with positive action always exists. While uncertainty lowers the actions of signatories, we find that it may increase participation. In addition, uncertainty may generate multiple equilibria. A treaty with low action and low participation may coexist with one with high action and high participation. Overall, and despite risk aversion, the impact of uncertainty on welfare may be positive. A reduction in uncertainty may hurt international cooperation.

Keywords: International Environmental Agreements, Risk Aversion, Uncertainty

JEL Classification: D62, D80, Q54

Suggested Citation

Boucher, Vincent and Bramoulle, Yann, Risk Aversion and International Environmental Agreements (November 2007). CIRPEE Working Paper No. 07-39, Available at SSRN: https://ssrn.com/abstract=1028537 or http://dx.doi.org/10.2139/ssrn.1028537

Vincent Boucher

Université Laval ( email )

2214 Pavillon J-A. DeSeve
Quebec, Quebec G1K 7P4
Canada

Yann Bramoulle (Contact Author)

Université Laval - Département d'Économique ( email )

Ste-Foy, Quebec G1K 7P4 G1K 7P4
Canada

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
82
Abstract Views
972
Rank
543,153
PlumX Metrics