Solar Geoengineering Governance: A Dynamic Framework of Farsighted Coalition Formation

Climate interventions with solar geoengineering could reduce climate damages if deployed in a globally coordinated regime. In the absence of such a regime, however, strategic incentives of single actors might result in detrimental outcomes. A well-known concern is that a "free-driver" (Weitzman 2015), the country with the strongest preference for cooling, might unilaterally set the global thermostat to its preferred level, thus imposing damages on others. Governance structures, i.e. more or less formal institutional arrangements between countries, could steer the decentralized geoengineering deployment towards the preferable global outcome. In this paper, we show that the coalition formation literature (an excellent summary is Ray & Vohra 2015) can make a valuable contribution to assessing the relative merit of different governance schemes. An important feature of the coalition formation literature is the sophisticated dynamic structure. A country pondering whether to leave a coalition anticipates that its departure could spark another process of disintegration among the remaining members of that coalition, which in turn may affect the assessment of whether leaving the coalition is worthwhile in the first place. This dynamic structure thus enables a more realistic picture of what coalitions are likely to form and remain stable. A second important feature of coalition formation models is wide control over the "rules of the game", for instance, which agents need to consent to a transition from one coalitional arrangement to another. This control over the institutional setting allows consistently comparing and discussing various international governance arrangements.

What went wrong? Fracking in Eastern Europe

A few years ago, optimistic estimates claimed that Eastern Europe possessed large shale formations that seemed likely to produce great quantities of natural gas. In addition, the countries in the region had strategic incentives to develop a transparent domestic shale industry in order to reduce its reliance on gas from Russia. Nevertheless, political and social factors as well as differences in physical characteristics, prevented the U.S. experience from being replicable in Eastern Europe. In the end, most multinational energy corporations announced that they had abandoned efforts to find and produce natural gas from shale rock in Eastern Europe. The paper discusses the impact of shale gas exploration on the quality of democratic governance by comparing and contrasting fracking regulations adopted in the United States with those of Eastern Europe. The main research question attempts to ask and identify: “what are the factors that influence a democratic and fair governance of public natural resources”.

Complex Disclosure

We present evidence that unnecessarily complex disclosure can result from strategic incentives to shroud information. In our laboratory experiment, senders are required to report their private information truthfully but can choose how complex to make their reports. We find that senders use complex disclosure more than half the time. This obfuscation is profitable because receivers make systematic mistakes in assessing complex reports. Regression and structural analysis suggest that these mistakes could be driven by receivers who are naive about the strategic use of complexity or overconfident about their ability to process complex information. This paper was accepted by Yan Chen, behavioral economics and decision analysis.

A meritocratic network formation model for the rise of social media influencers

Many of today’s most used online social networks such as Instagram, Youtube, Twitter, or Twitch are based on User-Generated Content (UGC), and the exploration of this content is enhanced by the integrated search engines. Prior multidisciplinary effort on studying social network formation processes has privileged topological elements or socio-strategic incentives. Here, we propose an untouched meritocratic approach inspired by empirical evidence on Twitter data: actors continuously search for the best UGC provider. We statistically and numerically analyze the network equilibria properties: while the expected outdegree of the nodes remains bounded by the logarithm of the network size, the expected indegree follows a Zipf’s law with respect to the quality ranking. Notably, our quality-based mechanism provides an intuitive explanation of the origin of the Zipf’s regularity in growing social networks. Our theoretical results are empirically validated against large data-sets collected from Twitch, a fast-growing platform for online gamers.

On the Origins of Forecast Walk-Downs: A Macro-to-Micro Perspective

We document a walk-down in gross domestic product (GDP) growth projections that is akin to that in sell-side analysts’ earnings forecasts. While the walk-down in earnings forecasts has been generally attributed to the strategic interplay between corporate managers and sell-side analysts, professional macro forecasters affiliated with the Federal Reserve are less susceptible to outside pressure. Our evidence shows that countercyclical variation in forecasting difficulty, due to asymmetry in the steepness of economic downturns relative to upturns, is relevant in explaining the walk-down in macro forecasts. Without rejecting the expectations game between managers and sell-side analysts, our article offers a more auspicious characterization of forecast walk-downs whereby such patterns can surface even without conditioning on strategic incentives for bias. An overarching implication is that research on the properties of sell-side analysts’ forecasts should consider strategic incentives for bias interacted with information about the state of the economy and heterogeneity in the cyclical exposure of individual firms.

Reframing the climate policy game

A key aim of climate policy is to progressively substitute renewables and energy efficiency for fossil fuel use. The associated rapid depreciation and replacement of fossil fuel-related physical and natural capital may entail a profound reorganisation of industry value chains, international trade, and geopolitics. Here, we present evidence confirming that the transformation of energy systems is well under way, and we explore the economic and strategic implications of the emerging energy geography. We show specifically that, given the economic implications of the ongoing energy transformation, the framing of climate policy as a prisoner’s dilemma is a poor description of strategic incentives. Instead, a new climate policy game emerges in which fossil fuel importers are better off decarbonising, competitive fossil fuel exporters are better off flooding markets, and uncompetitive fossil fuel producers – rather than benefitting from ‘free-riding’ – suffer from their exposure to stranded assets and lack of investment in decarbonisation technologies.

When strategic uninformed abstention improves democratic accountability

The recent development in formal studies of elections produced two sets of findings that question the custom to treat voter information as a prerequisite for competent democratic decision-making. One argues that uninformed abstention is an effective strategy to approximate informed electoral outcome, and another suggests that uninformed voters may motivate strategic political elites to improve accountability. This article bridges and extends these two findings by analyzing strategic incentives in the comprehensive voting model with abstention and its connection with electoral accountability. The proposed model offers a contextual explanation for two contrasting logic in uninformed abstention, delegation and discouragement, and shows that uninformed voting with abstention sometimes improves accountability. Furthermore, uninformed abstention is more effective in generating democratically preferred outcome under delegatory than discouraged context. The results make a significant addition to the existing accountability literature by providing a more general mechanism by which less voter information improves policy outcomes.