Luring others into climate action: coalition formation games with threshold and spillover effects
We explore the prospects of cooperation in a threshold public bad game. The experiment’s setup allows us to investigate the issue of effort coordination between signatories and non-signatories to a climate agreement under the threat of a catastrophe. Motivated actors may signal willingness to lead by committing a share of investments to a ‘clean’ but less remunerative project. The game is parametrized such that the externality cannot be fully internalized by the coalition, so that some effort on the part of the second-movers is required if the catastrophic losses are to be avoided. We manipulate both the relative returns of two investments and the extent to which the gains from leadership diffuse to second-movers. We find that the likelihood of reaching a sizeable coalition of early investors in the clean technology is higher when the benefits are appropriated by the coalition. Conversely, spillovers can entice second-movers’ adoption.
Valentina Bosetti, Melanie Heugues and Alessandro Tavoni
Oxf Econ Pap gpx017.