Why do rational politicians choose inefficient policy instruments? Environmental regulation, for example, often takes the form of technology standards and quotas even when cost-effective Pigou taxes are available. To shed light on this puzzle, we present a stochastic game with multiple...

Real-world negotiations differ fundamentally from existing bargaining theory. Inspired by the Paris Agreement on climate change, this paper develops a novel bargaining game in which each party quantities its own contribution (to a public good, for example), before the set of pledges must be...

We characterize the optimal policy and policy instruments for self-enforcing treaties whencountries invest in green technology before they pollute. If the discount factor is too small tosupport the first best, then both emissions and investments will be larger than in the first best,when...

Public regulation is increasingly facing competition from "private politics" in the form of activism and corporate self-regulation. However, its effectiveness, welfare consequences, and interaction with public regulation are poorly understood. This paper presents a unified dynamic framework for...

Standard analyses of economic policy assume exponential discounting, even though empirical and experimental evidence shows that preferences are time-inconsistent and discounting is hyperbolic. When policy makers - or the voters they must satisfy - apply smaller discount rates for long-term than...

This paper provides a flexible model of resource extraction, such as deforestation, and derives the optimal conservation contract. When property rights are "strong" and districts are in charge of extracting their own resources to get revenues, conservation in one district benefits the others...

In recent decades, democratic countries have signed hundreds of international environmental agreements (IEAs). Most of these agreements, however, are weak: they generally do not include effective enforcement or monitoring mechanisms. This is a puzzle in standard economic models. To study this...

We analyze a repeated game in which countries are polluting as well as investing in technologies. While folk theorems point out that the first best can be sustained as a subgame-perfect equilibrium when the players are sufficiently patient, we derive the second best equilibrium when they are...

Motivated by tropical deforestation, we analyze (i) a novel theory of resource extraction, (ii) the optimal conservation contract, (iii) when the donor prefers contracting with central rather than local governments, and (iv) how the donor's presence may induce institutional change. Deforestation...

I investigate when a flexible bargaining agenda, where side payments are possible, facilitates cooperation in a context with strategic delegation. On the one hand, allowing side payments may be necessary when one party's participation constraint otherwise would be violated. On the other, with...