Environmental and Resource Economics

, Volume 48, Issue 4, pp 609–628 | Cite as

The Biodiversity Bargaining Problem

  • Rupert Gatti
  • Timo Goeschl
  • Ben GroomEmail author
  • Timothy Swanson


We employ cooperative bargaining theory and Nash’s ‘rational threats’ idea to cast light on the biodiversity bargaining problem. The problem of global environmental negotiations is argued to be of the nature of a bargaining problem, in which bargainers must agree on the distribution of cooperative surplus in order to move to the bargaining frontier. We discuss the importance of both efficiency (bargaining frontier) and fairness (recognition of characteristics of bargainers) in the choice of the appropriate contract. We show that the incremental cost contract, used to resolve the biodiversity bargaining problem, is of the form of an extreme point contract that fails to recognise the contributions of the South to the production of cooperative surplus. A rational response to such a contract is the use of threats of biodiversity destruction. Contracts must evince both efficiency and fairness in order to represent lasting solutions.


Biodiversity Incremental costs International environmental agreements Nash cooperative bargaining North–south bargaining Rational threats 

JEL Classification

Q15 Q16 Q21 O13 O34 


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Copyright information

© Springer Science+Business Media B.V. 2010

Authors and Affiliations

  • Rupert Gatti
    • 1
  • Timo Goeschl
    • 2
  • Ben Groom
    • 3
    Email author
  • Timothy Swanson
    • 4
  1. 1.Faculty of EconomicsUniversity of CambridgeCambridgeUK
  2. 2.Chair of Environmental Economics, Alfred Weber InstituteUniversity of HeidelbergHeidelbergGermany
  3. 3.Department of EconomicsSchool of Oriental and African StudiesLondonUK
  4. 4.Hoffman Chair of Economics, Graduate Institute of International and Development StudiesInstitut de hautes études internationales et du développementGeneva 21Switzerland

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