Abstract
When abatement costs are uncertain, but correlated, and a country becomes pri-
vately informed that costs are low, then unilateral actions serve as a signalling
devise to reveal low costs and unilateral actions have the potential to trigger
positive responses abroad. However, the country engaging in unilateral actions
is the one with the highest expectation about the other countries’ reactions, and
it might suffer from an effect like the winners curse.
JEL Classification: Q28, H4, D8
Keywords: International environmental problems, unilateral reductions, signal-
ling costs
Acknowledgements: A Special thanks goes to A. Endres for valuable com-
ments, which have improved this paper considerably. Moreover thanks to F.
Jensen and all the comments at the presentations in Monterrey and Kolding. Fi-
nally, especially thanks to P. Madsen for improving the English.