Advantageous Leadership in Public Good Provision: The Case of an Endogenous Contribution Technology
CESifo, Munich, 2017
CESifo Working Paper No. 6352
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From the perspective of standard public good theory the total amount of greenhouse gas mitigation (or public good supply in general) will be lower in a leader-follower game than in a simultaneous Nash game so that strategic leadership is disadvantageous for climate policy. We show that this need no longer be true when the leading country has the option to employ a technology by which it can reduce its abatement costs and thus improve the productivity of its contribution technology. Our general result is illustrated by an example with Cobb-Douglas preferences and, finally, an empirical application to global climate policy is briefly discussed.
Energy and Climate Economics
Resources and Environment
Public Finance