Public Good Agreements under the Weakest-link Technology

• Alejandro Caparrós ^[1] ; Michael Finus ^[2]
  1. [1] Consejo Superior de Investigaciones Científicas

     Consejo Superior de Investigaciones Científicas

     Madrid, España

     
  2. [2] University of Graz

     University of Graz

     Graz, Austria

     
• Localización: Documentos de trabajo ( CSIC. Unidad de Políticas Comparadas ), Nº. 2 (Julio), 2019
• Idioma: inglés
• Enlaces
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• Resumen

  • We analyze the formation of public good agreements under the weakest-link technology. Whereas policy coordination is not necessary for symmetric players, it matters for asymmetric players; however, this fails in the absence of transfers. By contrast, with a transfer scheme, asymmetry may be an asset for cooperation. We haracterize various types and degrees of asymmetry and relate them to the stability of self-enforcing agreements. Asymmetric distributions of autarky public good provision levels (also representing asymmetric interests in cooperation) that are positively skewed tend to be conducive to the stability of agreements. We show that under such conditions, even a coalition including all players can be stable. However, asymmetries that foster stability (instability) tend to be associated with low (high) gains from cooperation.