Impact of social externalities on the formation of an international environmental agreement: an exploratory analysis

We analyze the impact of social externalities (SEs) on the stability of an international environmental agreement (IEA). We consider a framework in which players are divided into two homogeneous groups, namely, developed and developing countries. We assume that members of an IEA get some additional benefits, to which we refer as SEs. One main result is that any coalition that is internally stable will expand to include all countries, which is related to the minimum participation clause considered in some papers. However, our minimum, which is endogenously defined, is not the largest stable coalition size, but the grand coalition.