A Self-enforcing International Environmental Agreement on Matching Rates: Can It Bring About an Efficient and Equitable Outcome?

We incorporate matching schemes into a model of transboundary environmental agreements and investigate their effectiveness using three-stage game models. In the first stage, each country decides whether to accede to the agreement. In the second stage, the signatories collectively choose a common matching rate. Finally, in the third stage, each signatory and non-signatory determines its unconditional flat abatement noncooperatively, taking the value of the matching rate as given. An additional abatement is imposed upon each signatory, which is obtained by multiplying the total of all the other countries' flat abatements by the matching rate. The analysis of a matching agreement game with symmetric countries as players suggests the existence of a self-enforcing agreement leading to an efficient and equitable outcome, which shows that matching schemes are effective.