The Global Climate Game

Abstract

I study the private provision of a public good with strategic complementarities and preference uncertainty. The induced global game has a unique equilibrium. While the equilibrium may be efficient, there are well-identified cases for which it not and the public good is under-provided. I also introduce sequential global games. I show that sequential global games maintain the equilibrium uniqueness of static global games. Moreover, sequentiality expands the range of preferences for which the unique equilibrium is first-best. One application of the theory is climate change. Predictions of the model square well with real-world climate policies. Compared to existing explanations, my theory requires weaker assumptions on incentives and has more predictive power.

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