Global public goods and unilateral matching mechanisms (original) (raw)
Related papers
Pareto Improvement through Unilateral Matching of Public Good Contributions: The Role of Commitment
Social Science Research Network, 2014
When providing public goods through voluntary contributions, a donor may introduce unilateral matching in order to reduce underprovision of the public good and thus inefficiency. By itself, however, matching benefits the donor but harms the recipient. We apply Cornes and Hartley's aggregative game approach to provide a novel graphical explanation of this transfer paradox, and also show how it may be avoided by introducing a commitment device. JEL-Code: H230, H410.
Resource and Energy Economics, 2020
We compare two cooperation mechanisms for consumer/producers of a public good: the Nash Bargaining Solution (NBS) and the Exchange-Matching-Lindahl (EML) solution, where each agent speci…es her demand for and supply of the public good according to her personal exchange rate. Both mechanisms are Pareto-e¢ cient. EML is equivalent to matching. In our speci…c model with linear or quadratic bene…ts and quadratic costs, EML and NBS are equivalent when there are two agents. With more than two agents, the high-bene…t/lowcost agents are better o¤ under EML. We also analyze outsourcing, where agent i can pay agent j to produce the amount that agent i promised to contribute. In our speci…c model, payments from high-cost to low-cost agents (and from high-bene…t to low-bene…t agents) are (usually) lower in EML than in NBS.
Matching as a cure for underprovision of voluntary public good supply
Economics Letters, 2012
Matching mechanisms are regarded as an important instrument to bring about Pareto optimal allocations in a public good economy and to cure the underprovision problem associated with private provision of public goods. The desired Pareto optimal interior matching equilibrium, however, emerges only under very special conditions. But we show in this note that corner solutions, in which some agents choose zero flat contributions, normally avoid underprovision and illustrate and interpret our results by a simple numerical example.
Potentially Harmful International Cooperation on Global Public Good Provision
Economica, 2014
Recent international climate negotiations suggest that complete agreements are unlikely to materialize. Instead, partial cooperation between like-minded countries appears a more likely outcome. In this paper we analyze the effects of such partial cooperation between like-minded countries. In doing so, we link the literature on partial cooperation with so-called matching approaches. Matching schemes are regarded as providing a promising approach to overcome undersupply of public goods like climate protection. The functioning of matching mechanisms in a setting with an incomplete agreement, i.e. a contract where only a subset of the players participates, has however not been investigated yet. This paper fills this research gap by analyzing incomplete matching agreements in the context of international climate protection. We analyse their effect on both welfare and the global climate protection level. We show that matching coalitions may bring about a decline in global public good provision and a reduction in the welfare of outsiders.
Self-Enforcing Agreements Under Unequal Nationally Determined Contributions
SSRN Electronic Journal, 2016
For a large global economy with normal goods, and an unequal world income distribution, we consider the endogenous formation and stability of an international environmental agreement (IEA) under nationally determined contributions (NDCs). Nations share green R&D efforts and enjoy R&D spillovers if they join an IEA. Nonmembers do not enjoy R&D spillovers. We show that the Grand Coalition is stable under NDCs if all nations are active carbon abatement and R&D contributors. If some nations are inactive, because they lack sufficient income to provide carbon abatement and R&D, the stable coalition under NDCs is the coalition of all active (wealthier) nations.
SSRN Electronic Journal, 2009
Using the aggregative game approach as developed by Cornes and Hartley (2003, 2007) this paper analyzes the conditions under which matching mechanisms in a public good economy lead to interior matching equilibria in which all agents make strictly positive flat contributions to the public good. In particular we show that the distribution of income among the agents is a crucial determinant for the existence of interior matching equilibria. In addition, we explore which matching mechanisms show Warr neutrality and how the size of the economy affects the possibility of implementing a certain type of Pareto optimal solutions through matching.