Advantageous leadership in public good provision: the case of an endogenous contribution technology
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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 (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.
KeywordsPublic goods Leadership Choice of technology Climate policy
JEL ClassificationC72 H41 O31 Q54 Q55
Helpful comments from Dirk Rübbelke, the participants at a seminar at the ‘Mercator Institute for Global Commons and Climate Change’ at Berlin in July 2017, at the Annual Congress of the ‘Verein für Socialpolitik’ 2017 at Vienna and at the International Spring School at the TU Bergakademie Freiberg in March 2018 are gratefully acknowledged. Special thanks go to two referees whose detailed and insightful comments have been very helpful to revise and improve the paper.
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