Unilateral Actions the Case of International Environmental Problems

strong international environmental profiles will take unilateral actions, while
countries with low such profiles will tend to make their strategies contingent on
the actual achievements of other countries. This could also be supported by the
presence of self-serving beliefs.¹⁴ Taken together it says that countries that
value environmental protection highly also tend to believe that other countries
do. Hence, the country most likely to engage in unilateral action is the one that
has the most positive perception (expectation) about the response in terms of
increased reductions aboard. But this will have serious consequences for the
country undertaking the unilateral actions. Since it has the highest estimate, the
real size of the response is likely to be smaller, and, ex post, the unilateral ac-
tions will probably not be (as) profitable. This resembles the well-known phe-
nomenon called the winner’s curse from auction theory. This we restate as re-
sult 7.

Result 7: The curse of the country that initiates the unilateral action: Since the
country with the highest estimate of the others’ response will initi-
ate the unilateral action, this country is likely to over-estimate the
actual response.

Hence, in the end, the country undertaking the unilateral actions will be disap-
pointed, and should consider updating its beliefs about the responses.

Alternative specification of the information structure

By changing the information structure, we have identified conditions where
unilateral actions are profitable in the framework of Hoel (1991). We now offer
an alternative specification of how information can be transmitted to other
countries by use of a very simple public choice model. There are several rea-
sons why we do this. One is that this removes the necessity of assumption A4
and yields a more convincing argument for assumption A3b. It moreover gives

Psychological evidence reveals a stronger and more provocative phenomenon: people tend to
misread evidence as additional support for initial hypotheses.

14 For a discussion of such beliefs, see Dahl and Ransom (1999).

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