Voluntary Commitment to Environmental Protection: A Bounded Rationality Approach

Abstract

Global environmental protection is characterized as a public good. In contrast to the national level where the state is able to regulate external effects, there is a lack of supranational institutions which have enough power to force countries to reduce pollution levels. In spite of the free-riding problem it can nevertheless be observed that countries sometimes commit themselves to contribute to the public good `environmental protection'. The case of the Kyoto protocol for global $CO_2$ reduction demonstrates that some countries make substantial volunatry contributions, but others do not or on a much less level. The paper provides a game-theoretic explanation how the free-riding-problem can be overcome to some extent by voluntary cooperative behavior. It is analysed under which conditions free-riding countries can be motivated to make at least small pollution reduction efforts.global environmental policy, public good, voluntary cooperation, bounded rationality, game theory.