A simple dynamic climate cooperation model

Abstract

We introduce a novel framework for analyzing coalition formation, applied to climate cooperation. Our model allows for multiple rounds of negotiations and is able to explain the formation of large coalitions. The incentive of each coalition member to join and subsequently to sign a long-term contract is to prevent inefficient delay that arises as soon as a single country deviates. This undermines the free-rider incentive that destabilizes large coalitions in static coalition formation games. The equilibrium coalition size is then determined by a “threshold effect” due to which deviations of coalition members become unprofitable for sufficiently large coalitions.