The Formation of International Environmental Agreements: An Integrated Non-Cooperative Game Theory Perspective

The paper provides a theoretical perspective explaining why, at the beginning of the international environmental regime formation, such as Montreal Protocol and Kyoto, only a small coalition of developed countries would initiate the regime formation and/or voluntarily reduce their emissions while other countries would choose to be free riders. The paper also discusses why countries may be able to form a larger coalition by choosing different rules of the game, such as the exclusive membership game Gamma, sequential games, and games with utility transfers. Numerical examples are provided to illustrate the case of the dominant cartel formation game.