Unilateral Actions the Case of International Environmental Problems

polluting energy-supply system.¹² Again, we will analyse the effects of this as-
sumption in section 7.

Assumption A3a means that at the current state of information, that for all
ρ < ρ, the reduction levels will remain unchanged. This assumption is needed
in order for unilateral actions ever to be profitable, and can be justified by the
fact that costs of reductions refers to further reductions. We offer a more con-
vincing explanation in section 7. Given this assumption, A3b says that one and
only one country has an incentive to gather information. One way of thinking of
this is that at a given date, no country has such an incentive, but as time passes,
cost and damage figures change, or the cost of becoming informed changes.
(E.g. new scientific information reveals that damage costs are higher than ex-
pected.) All in all, the effect of this is assumed to be that at some date it is
worthwhile for one country to become informed. In section 7 we offer an alter-
native explanation of how to identify the country that undertakes the unilateral
actions.

Assumption A4 is probably the most critical assumption. The assumption
means that although a country becomes fully informed about the common cost
parameter, it cannot costlessly verify this information to the other countries.
This can be justified by pointing out that, even if the country observes that costs
are high, it has an incentive (now more than ever) to persuade the uninformed
countries that costs are low, by misstating data, or any possible way of misin-
forming. This assumption is needed in order for a country to distinguish itself
from the shadow of a high cost country by use of a costly signal (the full scale
unilateral actions) that would never be profitable if it had high costs. We also
offer an alternative set-up that, from a public choice point of view, gives a more
detailed description of the mechanisms by which information is transmitted be-
tween countries.

12 A more realistic approach is shown in Kessler (1998), where the more a country invests in the
information gathering activity (which increases costs), the higher is the probability to become
informed.

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