Strategic Behavior and the Environment > Vol 7 > Issue 1–2

Refundable Deposits as Enforcement Mechanisms in Cooperative Agreements: Experimental Evidence with Uncertainty and Non-deterrent Sanctions

Todd L. Cherry, Center for International Climate and Environmental Research Oslo (CICERO), Norway and Appalachian State University, USA, todd.cherry@cicero.uio.no David M. McEvoy, Appalachian State University, USA, mcevoydm@appstate.edu
 
Suggested Citation
Todd L. Cherry and David M. McEvoy (2017), "Refundable Deposits as Enforcement Mechanisms in Cooperative Agreements: Experimental Evidence with Uncertainty and Non-deterrent Sanctions", Strategic Behavior and the Environment: Vol. 7: No. 1–2, pp 9-39. http://dx.doi.org/10.1561/102.00000072

Published: 06 Dec 2017
© 2017 T. L. Cherry and D. M. McEvoy
 
Subjects
Environmental Economics,  Environmental Economics:Climate Change,  Public Economics:Public Goods,  Economic Theory:Game Theory,  International relations:International organization,  International organization,  Uncertainty,  Collective action,  Climate Change
 
Keywords
JEL Codes: D70C91C92F53H40Q54
Climate agreementsInternational environmental agreementsCollective actionEnforcementExperiments
 

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In this article:
Introduction
Experimental Design and Predictions
Results
Conclusions
Acknowledgments
References

Abstract

Managing global-scale threats such as climate change, loss of biological diversity and pandemics each constitute a global social dilemma, in which collectively countries are better off cooperating but individually they are better off free riding on the cooperative effort of others. Effective international institutions, or agreements, are required to better align the collective and individual incentives, but sovereignty demands that countries voluntarily agree to take action and then voluntarily comply with their commitments. Here we use experimental methods to test an agreement structure that, in theory, encourages meaningful participation and compliance. One of the defining features of the agreement is that it requires members to pay refundable deposits upon ratification. Our results show that this agreement structure can be successful at increasing the provision of public goods in the absence of a strong regulatory body. Most importantly, the agreement remains highly effective even in the face of uncertainty regarding the benefits from public good provision. Our results suggest that making ex ante deposits, even non-deterrent ones, serves as a coordination device that allows countries to achieve meaningful international cooperation.

DOI:10.1561/102.00000072

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Strategic Behavior and the Environment, Volume 7, Issue 1-2 ICT-based Strategies for Environmental Conflicts: Articles Overiew
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