Bard Harstad (Oslo University): "Pledge-and-Review Bargaining"

This paper develops a novel bargaining game inspired by the Paris climate-change agreement. Each party quantifies its own contribution before the set of pledges must be accepted. With uncertain tolerance for delay, each equilibrium pledge coincides with an asymmetric Nash bargaining solution. The weights on others’ payoffs reflect the uncertainty, and, inefficiently, they vary pledge-to-pledge. This bargaining solution is embedded in a dynamic game with endogenous technology, participation, enforcement, and contract terms. The results are consistent with the key differences between the agreements of Kyoto (1997) and Paris (2015) as well as the development from the former to the latter.