We present a model where heterogeneous districts choose both whether to experiment and the policies to experiment with. Since districts learn from each other, the first-best requires that policy experiments converge so that innovations are useful also for neighbors. However, the equilibrium...

Every government that controls an exhaustible resource must decide whether to exploit it or to conserve and thereby let the subsequent government decide whether to exploit or conserve. This paper develops a model of this situation and shows when a small probability that some future government...

This paper discusses a fundamental market failure regarding environmental conservation, and how the problem can be solved by appropriate policies. A "seller" (or owner of a tropical forest) may be motivated to conserve if a "buyer" is expected to pay.The buyer, however, does not find it...

While traditional contract theory takes the institutional environment as exogenously given, this paper analyzes how the agents' incentives to (de)centralize authority change when contracts are anticipated. In our model, induced institutional change will always harm the principal, and, under...

We analyze a repeated game in which countries are polluting and 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 not. This...

Free-riding is at the core of environmental problems. If a climate coalition reduces its emissions, world prices change and nonparticipants typically emit more; they may also extract the dirtiest type of fossil fuel and invest too little in green technology. The coalition's second-best policy...

A “conservation good” (such as a tropical forest) is owned by a seller who is tempted to consume (or cut), but a buyer benefits more from conservation. The seller prefers to conserve if the buyer is expected to buy, but the buyer is unwilling to pay as long as the seller conserves. This...

We analyze participation in international environmental agreements in a dynamic game in which countries pollute and invest in green technologies. If complete contracts are feasible, participants eliminate the holdup problem associated with their investments; however, most countries prefer to...

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...