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Bounded rationality and social interaction in negotiating a climate agreement

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Abstract

An agreement on climate change mitigation hinges on large-scale international cooperation. Rational agents are supposed to consider the cost and benefits of cooperation, which then determine their negotiation positions. Behavioral economics provides experimental evidence that decision-making in negotiation-like situations is influenced by systematic cognitive biases and social interaction. In this paper, we examine the impact of bounded rationality and social preferences on bargaining in international climate negotiations and illustrate how particular deviations from full rationality affect the incentives to cooperate. Of special interest are fairness preferences for burden-sharing rules and behavioral responses to different framings of climate change and policy, as well as implications of these for communication about climate change. The analysis will further address different levels of representation, including individual citizens, politicians, experts, and (professional) negotiators. The consequences of the most prominent nonstandard preferences and biases for negotiating a climate treaty are assessed, and specific strategies to foster cooperation are suggested.

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Notes

  1. For an overview of theories of multilateral environmental agreements, including behavioral approaches, see van den Bergh and Castells (2004).

  2. In contrast to public goods games where subjects contribute money or effort, in common-pool resource dilemmas players exploit a resource. In game-theoretic terms, both games represent a social dilemma.

  3. Reputation systems in general are used to facilitate interaction of negotiating parties, such as buyers and sellers in e-commerce, such as on e-bay.

  4. The Montreal Protocol is an international environmental agreement on the protection of the ozone layer through the phasing-out of ozone-damaging gases.

  5. There are a number of other reasons why the Montreal Protocol was successfully negotiated fairly quickly: a strong connection between ozone depletion and health, notably the risk of cancer; readily available substitutes for damaging gases; and a relatively small sector of the economy which facilitated a transition. Therefore, a comparison between the Montreal and Kyoto Protocols cannot offer strong conclusions about the effectiveness of incentives to participate.

  6. Rose and Kverndokk (1999) provide an overview of equity criteria to evaluate the distributional consequences of climate policy.

  7. A reviewer suggested that “symbolic politics” is somewhat related (Sears 2001). It stresses the influence of political symbols on political decisions. Examples are political language, the opposition between right and left wing, religious connotations, and family values. Such symbols often elicit emotional rather than rational responses, which in fact gives support to our focus on bounded rationality here.

  8. One might also mention here Cline (2007) who can be seen as close to Stern, both in approach and in conclusions.

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Acknowledgments

We are grateful to Wouter Botzen and three anonymous reviewers for useful comments on the paper.

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Authors and Affiliations

  1. Institute of Environmental Science and Technology, Universitat Autònoma de Barcelona, Edifici Cn, Campus UAB, 08193, Bellaterra, Cerdanyola, Spain

    Elisabeth Gsottbauer

  2. ICREA, Barcelona, Spain

    Jeroen C. J. M. van den Bergh

  3. Department of Economics and Economic History & Institute for Environmental Science and Technology, Universitat Autònoma de Barcelona, Edifici Cn—Campus UAB, 08193, Bellaterra, Cerdanyola, Spain

    Jeroen C. J. M. van den Bergh

  4. Faculty of Economics and Business Administration and Institute for Environmental Studies, VU University Amsterdam, Amsterdam, The Netherlands

    Jeroen C. J. M. van den Bergh

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Gsottbauer, E., van den Bergh, J.C.J.M. Bounded rationality and social interaction in negotiating a climate agreement. Int Environ Agreements 13, 225–249 (2013). https://doi.org/10.1007/s10784-012-9182-1

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