“Collective Action in an Asymmetric World” (with Richard Zeckhauser), Journal of Public Economics, 158, 2018: 103-112. (full text)
Abstract: A central authority possessing tax and expenditure responsibilities can readily provide an efficient level of a public good. Absent a central authority, voluntary arrangements must replace coercive ones, and significant under-provision must be expected. International public goods are particularly challenging due to the substantial asymmetries among nations. Small-interest nations have strong incentives to ride cheaply. Our empirical results reveal cheap riding intentions in providing for climate change mitigation, a critical international public good. The evidence is provided by individual nations’ Intended Nationally Determined Contributions voluntarily pledged for the Paris Climate Change Conference. We find that larger nations made much larger pledges in proportion to both their Gross National Incomes and their historical emissions. Implications for the Nordhaus Climate Club and carbon-tax proposals are discussed. To achieve Pareto optimality despite disparate cheap-riding incentives, we propose the Cheap-Riding Efficient equilibrium. That solution takes the Nash equilibrium as a base point, and then applies the principles of either the Nash Bargaining solution or the Lindahl equilibrium to proceed to the Pareto frontier.
“Evaluating the Paris Agreement’s Mitigation Pledges with Statistical Forecasting Models” (with Joseph Aldy and William Pizer)
Abstract: The 2015 Paris Agreement reflected an unprecedented breadth of participation in international climate policy, with some 185 countries comprising about 95% of global greenhouse gas emissions having submitted emission mitigation pledges subject to a new transparency and review mechanism. Assessing the environmental and economic impacts of these pledges will require economic and emission forecasts. We have developed forecasting tools, drawing from the economics and machine learning literatures, to produce country-specific emission forecasts to enable an assessment and comparison of expected mitigation effort by nearly every country participating in the Paris Agreement. We evaluate several specific models in the literature as well as employ a general forecasting model selection approach that searches over tens of thousands of models. In a general sense, we take each approach with a subset of our data, estimate a model, and then evaluate its out-of-sample performance with the balance of our data. Using the estimated “best” forecast models, we are assessing the expected emission abatement necessary to deliver on its pledge, comparing mitigation effort across countries, and investigating whether countries planning to reduce emissions from BAU forecasts tend to over-estimate their BAU emissions in their pledge.
“Partial Identification in Repeated Games with Imperfect Public Monitoring”
Abstract:I introduce repeated games with imperfect public monitoring to structural industrial organization and explores partial identification of model primitives. Game theoretic models in structural industrial organization have assumed that firms observe each other's behavior perfectly, and yet important problems such as collusion feature imperfect monitoring. I use incentive compatibility constraints, in which continuation payoffs come from the limit equilibrium payoff set, to deliver bounds on the structural parameters. By simulating a repeated duopoly competition game, I illustrate the identification procedure, and explore the implications of unknown public signal distributions and mis-measured firms' actions.
“Pledge and Agree: The Path to Cooperation” (with Antonio Alonso and Richard Zeckhauser), in progress