Collective Action in an Asymmetric World
A central authority possessing tax and expenditure responsibilities can readily provide an efficient level of a public good. Absent a central authority, voluntary arrangements must replace coercive ones. Significant under-provision must be expected. International public goods are particularly challenging because of the strong asymmetries among nations. We identify a solution, the Cheap-Riding Efficient Equilibrium, that defines the relative contributions of players in differing size (or preference intensity) to reflect cheap riding incentives, yet still achieves Pareto optimality. Players start by establishing the Alliance/Nash Equilibrium as a base point. From that point they apply either the principles of the Nash Bargaining Solution or the Lindahl Equilibrium to proceed to the Pareto frontier. We apply our theory to climate change mitigation, a critical international public good. Having examined the Nordhaus Climate Club proposal, we test the Alliance/Nash Equilibrium model using individual nations' Intended Nationally Determined Contributions pledged at the Paris Climate Change Conference. As hypothesized, larger nations made much larger pledges in proportion to their Gross National Incomes.
We thank Joe Aldy, Scott Barrett, Wolfgang Buchholz, Keith Dougherty, Jim Roumasset, Rob Stavins, and the participants at the Harvard Environmental Economics lunch, the 53rd Annual Meetings of the Public Choice Society, the Harvard Seminar in Environmental Economics and Policy, and the 3rd China Meeting of the Econometric Society for helpful comments. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Cuicui Chen & Richard Zeckhauser, 2018. "Collective Action in an Asymmetric World," Journal of Public Economics, . citation courtesy of