Global public goods and unilateral matching mechanisms

Abstract

While conventional agreements on international public goods require bilateral or multilateral cooperation, we show that unilateral action through matching mechanisms with a self-commitment device can possibly generate Pareto-improving outcomes. Even without commitment, unilateral matching may also benefit both players at corner situations. We further characterize the conditions under which this desirable outcome is achieved, particularly highlighting the role of the income distribution and its interplay with the preferences. Moreover, we propose a variant of unilateral matching that can generate Pareto-improving outcomes regardless of the preferences and the income distribution, indicating that income inequality may not be an obstacle for improving public good provision through unilateral matching. Show more