Abstract
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 (Stackelberg) game than in a simultaneous Nash game so that strategic leadership is disadvantageous for climate policy. We show that this needs no longer be true when the leading country has the option to employ a technology by ...
Abstract
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 (Stackelberg) game than in a simultaneous Nash game so that strategic leadership is disadvantageous for climate policy. We show that this needs 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. Then both countries also are better off in the Stackelberg game than in the Nash game. Our general result is illustrated by an example with Cobb-Douglas preferences and, finally, an empirical application to global climate policy is briefly discussed.
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