This section reports on experiments at the Cologne Laboratory for Economic Research
The Problem. Climate negotiations are a positive sum game—all parties could come out ahead. But there’s no guarantee. And in fact, climate negotiations are a type of game that induces players to act most uncooperatively, because they are highly susceptible to free riding.
A Prisoner’s Dilemma. In fact, climate negotiations are much like a prisoners’ dilemma (PD) game. No matter what player A does, player B will be better off “defecting” — not cooperating. The same is true for every player in the game (see The Climate Dilemma). Consequently, the prisoners find it most difficult to cooperate, especially when there are many of them, as there are in climate negotiations.
Why Experiment. The good news is that people cooperate more than is predicted by standard game theory. For example, theory predicts that if two people play a PD game 20 times in a row, neither will cooperate at all. But experiments show that they usually play cooperatively most of the time until very near the end. For this and similar reasons, experiments are needed to test which negotiation games are most likely to lead to strong cooperative outcomes, — self-enforcing treaties, and which are likely to fail.
Experiments. The first experiments test whether it is better to negotiate a global price or country-specific caps (quantities). Since a price seems better, the next stage is to text how abatement costs can be redistributed to increase the price that will be agreed. Experiments are also needed to test various methods of choosing global price, and to test the stability of a Price-with-Green-Fund treaty. Follow the progress of these experiments here.