Luring others into climate action: Coalition formation games with threshold and spillover effects

Cooperation between countries is required to overcome major societal problems, such as climate change. However, rational logic dictates that individual countries are incentivised not to act, instead preferring to �free ride� on the efforts of others. It is possible to imagine a scenario in which all countries wait for each other to show leadership, resulting in an irreversible catastrophe. Successful climate change mitigation therefore hinges on some actors leading by example. Those countries will have to push temporarily individual incentives aside in favour of the long-term greater good. This paper uses game theory to find out how countries can work together to mitigate against climate change. The �threshold public bad game� described in this paper was designed to capture the trade-offs faced by countries choosing whether to transition to clean technology, and to what extent. The game accounts for the fact that the degree to which a country commits to clean technology will dictate whether countries collectively manage to avert dangerous climate change or not. The game also features innovation �spillovers�.