TOWARD A POSITIVE THEORY OF COALITION-FORMATION AND ENDOGENOUS INSTRUMENTAL CHOICE IN GLOBAL POLLUTION-CONTROL

The paper analyzes the coalition formation process in a global emissio n game with asymmetric countries where the number of signatories, the abatement target and the policy instrument are chosen simultaneously. Exemplarily, a uniform emission reduction quota and an effluent charge are considered. Stability is analyzed in a superframe framework by ap plying the concept of coalition-proofness. The analysis also considers the impact of impatient agents, restricted and simple punishment prof iles. Two main results may be mentioned: First, paradoxically, IEAs ac hieve only little (if signed at all) if the externality problem is dis tinct. Second, our model helps to explain the frequent appearance of e mission quotas in international pollution control despite the recommen dations by economists to use market-based instruments like effluent ch arges.