Successful Leadership in Global Public Good Provision: Incorporating Behavioural Approaches (original) (raw)

In the standard model of voluntary public good provision and other game theoretic models, climate-friendly leadership of a country is not successful: A unilateral increase of this country's greenhouse gas abatement measures, i.e., contributions to the global public good of climate protection, will not lead to a positive reaction by the other countries but instead trigger a reduction of their abatement efforts and thus a crowding-out effect. In this paper it is shown how this undesired consequence need no longer occur when elements of behavioral economics are incorporated in the otherwise standard model of public good provision. In particular, strategic complementarities between the public good contribution of the leading country and those of the follower may result either if the follower has specific non-egoistic or other-regarding preferences or if the leader's contribution positively affects the follower's beliefs, i.e., his conjectural variations, about the leader's behaviour. Keywords Climate protection • Voluntary public good provision • Other-regarding preferences • Conjectural variations JEL Classification C72 • D03 • H41 • H87 • Q54 Wolfgang Buchholz gratefully acknowledges financial support from the German Federal Ministry of Education and Research BMBF through the research projects RECAP 15 (FKZ 01LA1139A) and ECCUITY (FKZ 01LA1104B). Todd Sandler received support from the Vibhooti Shukla endowment at the University of Texas at Dallas. Lisa Dippl, Michael Eichenseer and Dirk Rübbelke have given helpful comments on previous versions of this paper. We gratefully acknowledge the comments and suggestions of two referees that helped improve the paper.