CO SCI 136 Lecture Notes - Lecture 11: Montreal Protocol, Ozone Depletion, Subgame Perfect Equilibrium
Document Summary
However, the fact that countries can do better if cooperation can be sustained suggests that countries have incentives to develop institutions which can punish free riding. Such institutions do in fact exist in the form of international environmental agreements (ieas). The essential feature of ieas is that they must be self-enforcing. No country can be forced to sign an iea, and signatories to an iea can always with- draw from the agreement. If ieas can improve the management of shared environmental resources, they must make it attractive for countries to want to sign, and to want to carry out the terms of the agreement. These punishments and rewards are credible, because the signatories always maximize their collective net benefits: the magnitude of the punishments and rewards may not be sufficiently large to sustain a self-enforcing iea consisting of many countries.
