Uncertainty and risk aversion is introduced in the study of international environmental agreements. The paper shows that a stable treaty with positive action always exists. While uncertainty lowers the actions of signatories, it may increase participation. In addition, uncertainty may generate multiple equilibria. A treaty with low action and low participation may coexist with one with high action and high participation. Overall, and despite risk aversion, the impact of uncertainty on welfare may be positive. A reduction in uncertainty may hurt international cooperation.
Boucher, V. and Y. Bramoulle. "Risk Aversion and International Environmental Agreements." CIRPEE Working Paper No. 07-39. Nov. 2007.
