Matthew McGinty

This paper examines the total cost of public good provision when contributors face heterogeneous quadratic cost functions. We demonstrate that while the total cost of equal provision depends only on the arithmetic mean of marginal cost slopes, the total cost of cost‐effective provision depends on their harmonic mean. This relationship reveals that greater heterogeneity monotonically increases the cost savings from cost‐effective instead of equal provision. We propose a zero‐sum transfer system that implements cost‐effective levels while achieving equal cost sharing. Our framework offers a practical method to operationalize principles like Common but Differentiated Responsibilities (CBDR) in international environmental agreements, resolving the tension between cost‐effectiveness and equity concerns.

A uniform carbon tax and Citizen Carbon Fund are proposed as a zero-sum system of transfers that can increase equilibrium participation and result in a positive carbon check for each citizen covered by the agreement. The carbon tax results in efficient abatement, generates tax revenue and finances transfers that increase equilibrium participation in a climate agreement. A single carbon price is easier to negotiate than many different abatement requirements, but mirrors the results of a cap-and-trade agreement. An example using the four largest carbon emitters illustrates the set of stable agreements, the transfers required for stability and the resulting carbon checks.

This paper applies conjectural variations (CVs) to a model of public good provision and shows that CVs are superior to Nash beliefs. In addition to imposing consistency, as Bresnahan, I show that consistent conjectures (CCs) are obtained from individual payoff maximization. CCs emerge as the unique subgame perfect Nash equilibrium (NE) in a two‐stage game in which beliefs are chosen in Stage 1 and quantities in Stage 2. There is an individual payoff advantage to non‐Nash behavior, generating a Prisoner's Dilemma in conjectures in addition to the usual free‐rider problem associated with public goods. The correct and payoff maximizing conjecture is the unique equilibrium in an evolutionary framework against a player with Nash conjectures. The consistent conjecture equilibrium is the unique evolutionary equilibrium when both players conjectures evolve. Hence, the NE prediction is too optimistic when players have rational conjectures.

This paper presents a rule to allocate a coalition’s worth for superadditive games with positive externalities. The allocation rule awards each member their outside payoff, plus an equal share of the surplus. The resulting allocation maximizes coalition stability. Stable coalitions are Strong Nash equilibria since no subset of members has an incentive to leave. Similarly, no subset of non‐members has an incentive to join a stable coalition if the game is concave in this region. The allocation is risk‐dominant. All stable coalitions are robust to the maximum probability of 50% that players’ deviate from their individual best‐responses. The paper compares the allocation to the Shapley value and the Nash bargaining solution, and illustrates why these traditional rules result in small coalitions when applied to issues such as international environmental agreements.