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Subjective Beliefs in International Agreements

Author

Listed:
  • Doruk İriş

    (Department of Economics, Sogang University, Seoul)

  • Sungwoo Im,

    (Department of Economics, Sogang University, Seoul)

  • Hyeonggyun Ko

    (Department of Economics, Sogang University, Seoul)

Abstract
We study the impact of countries’ subjective beliefs, i.e., pessimism and optimism, on international agreements to provide global public goods. Under linear payoffs, we find that while pessimism could decrease signatories’ efforts, it can also increase the coalition size. Optimism yields the opposite effects. Using an objective welfare criterion, signatories are typically worse off but non-signatories could be better off. As a result, despite the bias the social welfare may increase. When some countries have identical subjective beliefs (optimistic or pessimistic) and the rest have objective beliefs, the proportion of subjective signatories strongly affects signatories’ effort level. A stable coalition may consist of countries with one type of beliefs or a mixture of types. If it consists of only type, then this type is the relatively more optimistic type.

Suggested Citation

  • Doruk İriş & Sungwoo Im, & Hyeonggyun Ko, 2020. "Subjective Beliefs in International Agreements," Working Papers 2010, Nam Duck-Woo Economic Research Institute, Sogang University (Former Research Institute for Market Economy).
    • Handle: RePEc:sgo:wpaper:2010
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    References listed on IDEAS

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    More about this item

    Keywords

    Coalition formation; International agreements; Global Public Goods; Subjective beliefs; Optimism; Pessimism;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods

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