TY  - JOUR
AU  - Eaton,Jonathan
AU  - Engers,Maxim
TI  - Threats and Promises
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4849
PY  - 1994
Y2  - September 1994
UR  - http://www.nber.org/papers/w4849
L1  - http://www.nber.org/papers/w4849.pdf
N1  - Author contact info:
Jonathan Eaton
Department of Economics
Penn State University
608 Kern Graduate Building
University Park, PA 16802-3306
Tel: (814) 865 - 8871
Fax: (814) 863 - 4775
E-Mail: jxe22@psu.edu
AB  - Global environmental concerns have increased the sensitivity of governments and other parties to the actions of those outside their national jurisdiction.  Parties have tried to extend influence extraterritorially both by promising to reward desired behavior and by threatening to punish undesired behavior.  If information were perfect, the Coase theorem would suggest that either method of seeking influence could provide an efficient outcome.  If the parties in question have incomplete information about each other's costs and benefits from different actions, however, either method can be costly, both to those seeking influence and in terms of overall efficiency. We compare various methods of seeking influence.  A particular issue is dissembling: taking an action to mislead the other party about the cost or benefit of that action.  By creating an incentive to dissemble, attempts to influence another's behavior can have the perverse effect of actually encouraging the action that one is trying to discourage.
ER  -